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ODERN 


KIRK       AND      STREET 


5fifl  ita 


GIFT 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 


HENRY  RAND  HATFIELD 
MEMORIAL  COLLECTION 

PRESENTED  BY 

FRIENDS  IN  THE  ACCOUNTING 

PROFESSION 


2695  LE  CONTE  AVENUE 
BERKELEY     CALIFORNIA 


BOOKKEEPING  FOR 
MODERN  BUSINESS 


BY 


JOHN   G.  KIRK,   Ph.B.,  M.C.S. 

Principal  of  Frankford  Evening  High  School, 

and    Head    of    Department    of    Commerce, 

Frankford  High  School,  Philadelphia 


AND 


JAMES  L.  STREET,  B.S.,  M.C.S. 

Head  of  Department  of  Commerce,  William 

Penn  High  School,  and  Wanamaker  Institute 

of  Industries,  Philadelphia 


SCRIPT  BY  RENfi  GUILLARD 


THE  JOHN  C.  WINSTON  COMPANY 

PHILADELPHIA  CHICAGO 


Copy  right.  1920,  l)y 
The  Johx  C\  Winston  Compaxy 


All  rights  reserved 


lU^'-^ 


PREFACE 


Bookkeeping  for  Modern  Business  is  a  working  manual  planned  to  develop  logically  the 
correct  principles  of  bookkeeping— principles  advocated  and  practiced  by  modern  bookkeepers. 
It  has  been  designed  to  meet  the  requirements  of  business  colleges,  high  schools,  and  institutes 
that  prepare  students  for  business,  and  is  well  adapted  for  evening  schools. 

The  authors  in  preparing  this  text  have  made  use  of  the  fund  of  general  information 
which  all  students  have  acquired  before  they  take  up  the  study  of  bookkeeping.  They  have 
used  as  their  basis  for  developing  the  account  what  knowledge  the  students  possess  of  the 
simplest  business  transactions,  such  as  the  receiving  and  paying  out  of  money  which  comes 
into  their  possession,  the  facts  that  bring  about  the  condition  of  owing  and  being  owed, 
their  knowledge  of  arithmetic  learned  in  the  elementary  schools,  etc.  The  students  are  led 
from  one  class  of  business  transactions  to  another  in  such  a  way  that  they  realize  the  necessity 
for  the  use  of  more  than  one  account  in  order  to  keep  a  complete  record  of  the  various  classes 
of  transactions.  To  this  end  a  large  number  of  simple  and  reasonable  exercises  have  been 
included,  all  of  which  give  an  intelligent  explanation  of  each  new  principle.  Moreover, 
every  process  is  so  fully  illustrated  by  model  exercises  that  the  students  are  never  lost  in  the 
mazes  of  the  average  bookkeeping  manual. 

An  effort  has  been  made,  also,  to  simplify  the  transition  from  one  subject  to  another 
by  anticipating,  in  the  method  of  treatment  and  in  the  character  of  the  exercises  on  one 
subject,  the  difficulties  of  the  next.  The  treatment  of  accounts,  for  example,  is  made  to 
pave  the  way  for  an  understanding  of  the  two-fold  effect  of  a  business  transaction.  They 
soon  realize,  when  a  transaction  is  analyzed,  that  more  than  one  account  is  necessary  to  record 
the  transaction  completely.  Following  this  the  students  are  easily  guided  from  the  subject 
of  accounts  to  the  books  of  original  entry  where  the  transactions  are  classified  before  they  are 
entered  in  the  ledger  accounts. 

Likewise,  such  analytical  steps  as  are  necessary  for  an  intelligent  explanation  of  the 
journal  are  fully  illustrated  by  model  exercises,  and  from  it  the  other  books  of  original  entry 
are  developed.  Thus  many  of  the  difficulties  in  teaching  the  principles  of  the  cashbook, 
the  purchases  journal,  and  the  sales  journal,  all  of  which  are  practically  identical  in  principle, 
are  eliminated.  Because  of  the  complete  illustrations  by  model  exercises  at  each  stage  of  the 
work  the  close  relation  of  the  journal  to  the  cashbook,  the  purchases  journal,  and  the  sales 
journal  can  be  easily  understood  by  the  student.  The  authors  show  clearly  that  a  record  of 
a  business  transaction  in  any  one  of  these  books  represents  a  journal  entry  just  as  fully, 
though  differing  in  form,  as  a  record  made  in  the  regular  journal.  This  fact  made  clear,  these 
books  become  special  journals  and  are  presented  as  such. 

An  effort  has  been  made  throughout,  both  in  the  classification  of  accounts,  the  building 
of  the  financial  statements,  and  the  closing  of  the  ledger,  to  conform  to  sound  theory  and 
general  practice.  Suggestions  for  building  and  proving  the  financial  statements  are  fre- 
quently made  in  order  that  the  students  may  become  thoroughly  familiar  with  modern 
forms  and  the  arithmetical  processes  involved. 

(3) 


M511257 


4  PREFACE 

survey  of  the  text  will  reveal  an  unusual  amount  of  carefully  graded  aescriptive 
matter  relating  to  banking,  filing,  and  business  papers  helpful  to  the  students  when  taking 
up  the  study  of  bookkeeping.  A  limited  amount  of  clerical  work  in  writing  checks,  notes, 
drafts,  trade  acceptances,  etc.,  and  the  proper  filing  and  checking  of  the  same,  has  been  given. 

The  authors  have  attempted  throughout  to  avoid  technicalities  and  to  present  the  subject 
of  bookkeeping  in  the  most  approved  pedagogical  manner  by  guiding  the  students  from  the 
known  to  the  unknown,  from  the  simple  to  the  complex.  In  presenting  each  subject,  the 
approach  has  been  made  so  simple  and  obvious  that  each  successive  step,  developed  and 
illustrated  clearly,  is  learned  with  astonishing  ease.  A  large  quantity  of  material  for  drill  in 
connection  with  each  subject,  planned  to  meet  the  needs  of  the  busy  teacher  and  of  the  average 
class,  has  been  supplied. 

The  selection  of  the  subject  matter  of  this  text  and  the  method  of  presentation  have 
grown  directly  out  of  the  authors'  extensive  preparation  in  collegiate  and  business  schools; 
their  practical  accounting  experience  in  manufacturing  and  banking  houses;  their  practical 
teaching  experience  in  business  colleges,  institutes,  academies,  and  high  schools,  both  day  and 
evening  courses,  and  out  of  the  classroom,  where  it  has  been  tested  by  other  teachers.  Invalu- 
able assistance  has  been  given  by  those  who  have  been  teaching  from  the  original  manuscript, 
and  by  accountants  and  business  men  who  have  suggested  some  changes. 

The  authors  desire  to  express  their  sincere  appreciation  of  the  assistance  which  they 
have  received  from  business  men,  accountants,  and  teachers  in  both  business  colleges  and 
high  schools.  Special  thanks  are  due  Mr.  R.  J.  Bennett,  C.A.,  C.P.A.,  who  read  the  manuscript 
and  made  many  valuable  suggestions  regarding  the  classification  of  accounts,  financial  state- 
ments, and  the  closing  of  the  ledger;  Miss  Mary  A.  Waesche,  B.S.,  Head  of  the  Bookkeeping 
Department  of  the  Wanamaker  Institute  of  Industries,  Philadelphia,  and  an  Instructor 
in  the  Department  of  Commerce  in  the  Frankford  High  School,  who  has  used  the  manuscript 
in  her  classes  for  several  years  and  has  contributed  portions  of  the  book  in  its  preliminary 
form;  and  to  other  teachers  of  bookkeeping  in  the  Frankford  High  School  and  the  William 
Penn  High  School  who  have  either  read  the  manuscript  or  have  used  it  in  their  classes. 

Thanks  are  also  due  Dr.  William  D.  Lewis,  Deputy  Superintendent  of  Public  Instruction, 
Harrisburg,  Pa.;  Mr.  H.  Winfield  Wright,  C.P.A.,  Philadelphia;  Mr.  Parke  Schoch,  Principal, 
and  Mr.  Murray  Gross,  Head  of  the  Department  of  Commerce,  West  Philadolpliia  High  School 
for  Girls,  Philadelphia;  Dr.  Laura  H.  Cadwallader,  Head  of  the  Department  of  Commerce, 
South  Philadelphia  High  School  for  Girls,  Philadelphia;  Mr.  Sydney  A.Farbish,  of  the  Depart- 
ment of  English  in  the  Frankford  High  School,  Philadelphia;  Mr.  Leigh  W.  Prentice,  German- 
town  High  School,  Philadelphia;  Mr.  C.  D.  Moore,  Head  of  the  Bookkeeping  Department, 
Banks  Business  College,  Philadelphia;  Mr.Rene  Guillard,  formerly  of  the  Zanerian  College, 
Columbus,  Ohio,  now  with  tli<>  Banks  Business  College,  Philadelphia;  Mr.  C.  J.  Halson, 
Federal  Reserve  Bank,  Philadelphia. 


CONTENTS 

PART  I 

FUNDAMENTAL   PRINCIPLES   AND   DEFINITIONS 

PAGE 

A  Business  Transaction  Defined 9 

Bookkeeping  Defined 9 

The  Development  of  an  Account 9 

The  Terms  Debit  and  Credit  Explained 11 

Various  Accounts  Named;   Their  Functions 11 

The  Ledger  and  Its  Use 12 

The  Cash  Account,  with  Exercises 12 

Exercises  in  Ruling 15 

Personal  Accounts  with  Creditors;   Exercises 17 

Personal  Accounts  with  Customers;   Exercises     20 

Promissory  Notes  Illustrated  and  Explained 23 

The  Notes  Receivable  Account,  with  Exercises 25 

The  Notes  Payable  Account,  with  Exercises 27 

The  Merchandise  Accounts  Illustrated  and  Explained 31 

The  Merchandise  Purchases  Account,  with  Exercises 32 

The  Freight  Inward  Account,  with  Exercises 35 

The  Merchandise  Sales  Account,  with  Exercises      36 

The  Merchandise  Inventory  Illustrated  and  Explained 38 

The  Merchandise  Inventory  Account,  with  Exercises 39 

The  Merchandise  Trading  Account,  with  Exercises 42 

The  Selling  Expense  Account,  with  Exercises 45 

The  General  Expense  Account,  with  Exercises 47 

The  Profit  and  Loss  Account,  with  Exercises 50 

The  Proprietor's  Account,  with  Exercises 53 

PART  n 

THE   DEVELOPMENT   OF   DEBIT   AND   CREDIT   IN  BOOKS   OF 

ORIGINAL  ENTRY 

The  Double  Effect  of  a  Business  Transaction  Illustrated  by  Ledger  Accounts   .  57 

A  Model  Set  of  Accounts  Illustrated 62 

A  Trial  Balance  of  Totals  Illustrated  and  Explained 63 

(5) 


6  CONTENTS 

PAGE 

Supplementary  Exercises  in  Accounts 64 

Journalizing  Illustrated  and  Explained 65 

The  Double  Effect  of  a  Business  Transaction  Illustrated  by  the  Journal 

Method 66 

A  Model  Journal  Illustrated 68 

Books  of  Original  Entry  Explained 70 

Books  of  Final  Entry  Explained 70 

Auxiliary  Books  Explained 70 

Posting  Defined  and  Explained 70 

Exercises  in  Journalizing,  Posting,  and  Taking  a  Trial  Balance 73 

Development  of  the  Sales  Journal  from  the  Journal,  with  Exercises  ....  73 

Development  of  the  Purchases  Journal  from  the  Journal,  with  Exercises  77 
Development  of  the  Cash  Journal  or  One-Page  Cashbook  from  the  Journal, 

WITH  Exercises 80 

The  Two-Page  Cashbook,  with  Exercises 83 

Closing  and  Ruling  the  Cashbook,  with  Exercises 84 

PART  III 

THE   FLOUR   AND   GRAIN   BUSINESS   WITHOUT   BUSINESS   PAPERS 

General  Explanation 88 

Books  and  Forms  Involved  in  the  Business 88 

Transactions — September  Business 89 

Checking  and  Closing  the  Purchase  Journal 98 

Checking  and  Closing  the  Sales  Journal 100 

Checking,  Balancing,  and  Closing  the  Cashbook 101 

A  Trial  Balance  of  Differences  Illustrated  and  Explained 105 

Suggestions  for  Finding  Errors  in  the  Trial  Balance 107 

Correction  of  Errors  in  Books  of  Original  and  Final  Entry 108 

Supplementary  Exercises 109 

Development  of  the  Notes  Receivable  Book  from  the  Journal,  with  Exercises  112 

Development  of  the  Notes  Payable  Book  from  THE  Journal,  with  Exercises  110 

PART  IV 

THE  FLOUR   AND   GRAIN   BUSINESS   WITH   BUSINESS   PAPERS 

General  Explanation 120 

Books  ^nd  Forms  Involved  in  the  Business 120 

Transactions — October  Business 121 

Filing  Business  Papers 126 

Statement  of  Customer's  Accounts,  with  Exercises     133 


CONTENTS  7 

PAGE 

The  Profit  and  Loss  Statement  Illustrated  and  Explained 137 

Closing  Journal  Entries  Illustrated  and  Explained 138 

The  Balance  Sheet  or  Financial  Statement  Illustrated  and  Explained    .    .  146 

Proof  Trial  Balance  Illustrated 148 

The  Working  Sheet  Illustrated  and  Explained 149 

Reviews:   Test  Ledgers;   Statements;   Closing  the  Ledger 151 

Supplementary  Exercises 153 

PART  V 

INTRODUCTION   TO   BANKING   PRACTICE 

Banking  Accounts  Fully  Explained 158 

Savings  Bank 158 

Commercial  Bank 158 

Deposits 158 

Federal  Reserve  System 159 

Check  Records  Illustrated 160 

Bank  Statements 164 

Reconciliation  of  Bank  Statement  Illustrated 165 

DEVELOPMENT   OF  ADDITIONAL  BOOKS   AND   ACCOUNTS 

Discounts  and  Terms  of  Payments,  with  Exercises      165 

Discount  on  Purchases  Account,  with  Exercises 167 

Discount  on  Sales  Account,  with  Exercises 168 

Interest  and  Methods  of  Calculating 169 

Interest  Earned  Account,  with  Exercises 170 

Interest  Paid  Account,  with  Exercises      171 

Furniture  and  Fixtures  Account,  with  Exercises 173 

Real  Estate  Account,  with  Exercises 175 

Insurance  Prepaid  Account,  with  Exercises 177 

Special  Column  Cashbook,  with  Exercises 180 

THE   WHOLESALE   CARPET   AND   RUG   BUSINESS 

General  Explanation 184 

Transactions  for  November 184 

Perpetual  Inventory  Card  System 186 

Profit  and  Loss  Statement 199 

Percentage  Results  Explained 202 

Drafts  and  Trade  Acceptances 204 

Exercises  on  Drafts  and  Trade  Acceptances      211 


8  CONTENTS 

PAGE 

THE  WHOLESALE   CARPET   AND   RUG   BUSINESS 

Partnership  Business 215 

General   Explanation 215 

Transactions  for  December 216 

Closing  Journal  Entries 222 

Depreciation  Accounts      223 

Review  Exercises 224 

CLOSING   THE   LEDGER— DIRECT   METHOD 

General  Explanation 228 

Ledger  Closed  by  Direct  Method  Illustrated 230 

Abbreviations,  Contractions  and  Signs  Used  in  Business 232 

Index 23.> 


BOOKKEEPING  FOR  MODERN  BUSINESS 


PART   I 


INTRODUCTION 

FUNDAMENTAL   PRINCIPLES   AND   DEFINITIONS 

Business  Transactions.— When  two  persons  exchange  articles  of  value,  they  engage  in 
trade.  If  a  farmer  brings  butter  and  eggs  to  the  country  store,  and  receives  in  return 
sugar  and  coffee,  he  and  the  storekeeper  engage  in  trade.  If  a  merchant  rents  a  storeroom 
for  which  he  pays  the  owner  $50.00  each  month,  he  and  the  owner  of  the  store  engage  in 
trade.  If  a  bookkeeper  receives  $80.00  a  month  for  his  services,  he  and  the  owner  of 
the  store  engage  in  trade.  If  you  buy  a  set  of  bookkeeping  supplies  for  $5.00  from  the 
owner  of  your  school  and  agree  to  pay  for  them  at  the  end  of  the  month,  you  and  the  owner 
of  the  school  engage  in  trade.     All  such  trades  or  exchanges  are  called  business  transactions. 

A  Business  Transaction  is  an  exchange  of  values;  that  is,  one  value  is  given  in 
exchange  for  another. 

Bookkeeping.— Years  ago  men  who  engaged  in  trade  learned  that  it  was  unwise  to  carry 
on  business  without  keeping  written  records  of  their  business  transactions.  They  found  it 
was  necessary  to  keep  written  records  in  order  that  they  could  tell,  from  time  to  time,  the 
amounts  of  cash  received  and  paid  out;  the  value  of  the  goods  purchased  and  sold;  what 
persons  owed  the  business  for  goods  sold  them  on  credit,  and  how  much;  what  persons  the 
business  owed  for  goods  purchased  on  credit,  and  how  much;  the  amount  of  cash  paid  out  for 
rent,  coal,  help,  etc. 

From  these  written  records  the  owner  of  the  business  could  determine  what  the  business 
owned  and  what  the  business  owed,  and  whether  the  business  was  being  run  at  a  profit  or  a 
loss.     The  process  of  keeping  such  records  is  called  bookkeeping. 

Bookkeeping  consists  in  recording  business  transactions  in  a  systematic  manner  so 
that  the  results  of  the  various  kinds  of  business  transactions  may,  at  any  time,  be 
easily  determined. 

An  Account.— In  bookkeeping,  written  records  are  kept  to  show  the  results  of  the  various 
kinds  of  business  transactions.  Students  who  begin  the  study  of  bookkeeping  may  know 
nothing  of  the  way  firms  record  business  transactions  but  they  are  famiUar  with  receiving  and 
paying  out  cash  which  comes  into  their  possession.     Take  the  following  very  simple  illus- 

(9) 


10 


BOOKKEEPING  FOR  MODERN  BUSINESS 


tration,  to  show  how  everyday  transactions  are  recorded  in  a  way,  very  similar  to  the  method 
universally  used  by  the  experienced  bookkeeper  in  recording  amounts  of  cash  received  and 
paid  out. 

Illustrative  Exercise 

September  1.  I  received  S5.00  from  father;  S2.00  from  mother. 

2.  I  paid  .S4.25  for  a  pair  of  shoes;  oO^  for  collars. 

3.  I  paid  SI. 00  for  a  cap:  25^  for  a  notebook. 

4.  I  received  75(^  from  father. 

5.  I  paid  2')^  for  a  ticket  foi"  a  Ijall-game. 

6.  I  counted  my  money  and  found  I  had  81.50. 

The  Student's  Notebook  Record. — Turning  to  the  student's  notebook  in  which  he 
had  entered,  in  one  column,  the  amounts  of  cash  received,  and  in  another  column,  the  amounts 
of  cash  paid  out.  we  should  find  probably  the  following  record. 

Illustration  1 


I^Z^" 


/~^..i-i:zy  i:>-tyt^C^ 


# 


3  00 


oa 


7^ 

^7^ 


Jy^€^^^■y'^^y 


2S 

SO 

2-^ 


23 

2  S 


Such  a  two-column  record,  which  the  student  would  make  in  his  notebook  for  the  amounts 
of  cash  received  and  cash  paid  out  by  him,  under  the  title  of  Cash,  is  known  in  bookkeeping 
as  an  Account.  A  careful  examination  of  Illustration  1  may,  more  readily  than  words, 
convey  to  your  mind  its  purpose  and  the  method  of  keeping  it. 

An  Account  is  a  record  of  transactions  of  the  same  class,  grouped  or  classified  under  one 
title  in  order  to  .show  the  result  of  some  certain  group  of  transactions,  such  as  a  group  involving 
the  receiving  and  joaying  out  of  cash,  called  the  Cash  account. 

A  Cash  Account,  for  instance,  is  kept  by  placing  the  amounts  of  cash  received  in  one 
column  and  the  amounts  of  cash  paid  out  in  another  column.  The  i-esvdt,  called  the  cash  on 
hand,  is  found  at  any  time  ])y  taking  the  difference  between  the  total  amount  of  cash  received 
and  the  total  amount  of  cash  paid  out. 

The  Bookkeeper's  Record. — The  bookkeeper  in  making  his  record  for  the  amounts  of 
cash  received  and  paid  out  bj''  the  student  would  arrange  these  items  in  a  way  similar  to  the 
student's,  but  he  would  use  paper  specially  ruled  to  show  the  dates,  amounts,  and  character 
of  the  various  transactions. 


FUNDAMENTAL  PRINCIPLES  AND  DEFINITIONS 


11 


The  following  form  illustrates  the  ruling  of  an  account  together  with  the  bookkeeper's 
record  for  the  student's  cash  transactions. 


Illustration  2 


DATE 

EXPLANATION 

F. 

AMOt] 

NT 

DATE 

EXPLANATION 

F 

AMOWT 

&S^^ 

/ 

jy^zy^X.^yl-' 

^ 

oc> 

^^^^^■^i^ 

2 

>^hCePn&^ 

V 

IS 

/ 

^l<^Ldy 

2 

oo 

2 

OcTZ^^*^-'^ 

50 

^ 

.^i^^i^-^^ 

7 

7^ 

3 
3 

/ 

2S 

s 

/t:e^ey^£:f-t-<ii^U^^tz- -p^-A^ 

c 

2S 

2^ 

Explanation  of  an  Account. — A  careful  study  of  the  above  form  will  show  that  the  heavy 
vertical  three-line  ruling  in  the  middle  divides  the  account  into  two  distinct  parts,  the  rulings 
of  which  are  exactl.y  alike.  Each  part  contains  columns  for  the  date,  explanation,  folio  or 
page,  and  the  amounts  of  cash  received  or  paid  out  as  shown  in  the  illustration.  The  folio 
columns  are  left  blank  because  their  purpose  is  to  be  explained  later. 

Observe  that  the  amounts  of  cash  received  are  entered  in  the  amount  column  on  the  left 
side,  and  the  amounts  of  cash  paid  out  are  entered  in  the  amount  column  on  the  right  side 
of  the  account.  The  date  of  each  transaction  is  entered  in  the  date  column,  the  year  being 
entered  in  small  figures  in  the  date  column,  just  above  the  first  entry.  A  suitable  description 
may  be  made  in  the  wide  explanation  columns  which  will  give  a  complete  account  of  the 
sources  of  the  cash  received  and  the  causes  of  the  cash  paid  out. 

The  Terms  Debit  and  Credit. — We  have  learned  that  an  account  is  divided  into  two 
parts,  a  left-hand  side  and  a  right-hand  side.  By  universal  custom,  the  left-hand  side  is  called 
the  debit  side,  and  the  right-hand  side  is  called  the  credit  side.  These  are  bookkeeping  terms 
used  to  denote  the  position  an  item  occupies  in  an  account. 

The  Purpose  of  an  Account. — Three  important  points  must  be  clearly  understood  in 
an  account: — its  object,  the  method  of  recording  it,  and  its  result. 

(1)  The  Object. — An  account  is  kept  in  order  to  have  a  complete  record  of  all  the  business 
transactions  of  the  same  class. 

(2)  The  Method. — The  method  is  concerned  with  recording  the  business  transactions  on 
the  proper  sides  of  the  account. 

(3)  The  Result. — The  result  of  an  account  is  found  by  taking  the  difference  between  the 
two  sides  of  the  account.  It  shows  the  result  of  some  particular  class  of  business  transactions 
such  as  that  shown  by  the  Cash  account. 

The  Cash  Account  may  be  the  only  account  necessary  to  record  the  student's  trans- 


12  BOOKKEEPING  FOR   MODERN   BUSINESS 

actions.  In  business  it  is  necessary  to  keep  a  record  showing  the  value  of  merchandise  pur- 
chased and  sold,  notes  issued  and  received,  expenses  incurred,  etc.,  therefore  other  accounts 
are  necessary,  as,  for  example: 

The  Mercliandiso  Purchases  account  which  shows  the  cost  of  all  merchandise  bought. 

The  Merchandise  Sales  account  which  shows  the  value  of  all  merchandise  sold. 

The  Soiling  Expense  account  which  shows  the  cost  of  conducting  the  sales  department 
of  the  business. 

The  General  Expense  account  which  shows  the  cost  incurred  in  the  general  supervision 
and  management  of  the  business. 

A  Personal  account  which  shows  all  the  transactions  with  a  given  person. 

The  Notes  Receivable  account  which  shows  the  amount,  at  face  value,  of  all  notes  and 
other  written  promises  to  pay  that  have  been  received  and  disposed  of  by  the  business. 

The  Notes  Payable  account  which  shows  the  amount,  at  face  value,  of  all  notes  and  other 
written  promises  to  pay  that  have  been  issued  and  redeemed  by  the  business. 

The  Interest  Earned  account  which  shows  the  amount  of  interest  received  by  the 
business  for  the  use  of  money. 

The  Interest  Paid  account  which  shows  the  amount  of  mterest  paid  by  the  business 
for  the  use  of  money. 

The  Proprietor's  account  which  shows  the  amount  of  all  investments  and  withdrawals 
of  money  or  merchandise  by  the  proprietor. 

All  of  the  kinds  of  accounts  named  above,  such  as  Merchandise  Purchases,  Merchandise 
Sales,  etc.,  would  be  likel}^  to  appear  in  any  business.  In  some  lines  of  business  other  accounts 
would  be  needed.  All  of  the  accounts  necessary  to  record  the  various  transactions  of  a  business 
are  known  as  a  set  of  accounts. 

The  book  which  contains  these  accounts  of  the  business,  is  called  the  Ledger.  Every 
transaction  of  the  business  is  classified  and  placed  in  its  proper  account  in  the  ledger. 

THE   CASH   ACCOUNT 

•The  term  Cash,  as  used  in  bookkeeping,  includes  species  (gold,  silver,  nickel,  and  bronze), 
Federal  Reserve,  treasury,  and  national  bank  notes,  gold  and  silver  certificates,  checks,  bank 
drafts,  certificates  of  deposit,  post-office  and  express  money  orders,  and  whatever  is  received 
and  given  as  money. 

The  object  of  keeping  a  Cash  account  is  to  show  the  amounts  of  cash  received  and  paid  out. 

Illustrative  Exercise 

January  1.  Received  cash  from  the  proprietor,  $1,412.75. 

2.  Paid  cash  for  merchandise,  $()r)().()0. 

3.  Received  cash  from  Brown  Pros.,  $27.63. 

4.  Paid  cash  to  John  H.  (lilson,  $47. .'>(). 

5.  Received  cash  for  merchandise  sold  to-day,  $250.11. 

6.  Paid  cash  for  postage  stanips,  $4.50. 
8.  Sold  merchandise  for  cash,  $125.00. 

10.      Bought  merchandise  for  cash,  $230.00. 

12.  Received  cash  from  L.  L.  Tucker,  $432.65. 

13.  Paid  cash  for  stationery,  $12.45. 


THE  CASH  ACCOUNT 


13 


Illustration  3 


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00 

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SO 
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Observations :  Debit  the  Cash  account  to  show  the  amount  of  cash  received  by  the  business. 
Credit  the  Cash  account  to  show  the  amount  of  cash  yaid  out  by  the  business. 

Analysis  of  the  Model  Cash  Account: 

January  1.     The  Cash  account  is  debited  with  $1,412.75  to  show  the  amount  of  cash 
received  by  the  business. 

2.  The  Cash  account  is  credited  with  $650.00  to  show  the  amount  of  cash 

yaid  out  by  the  business. 

3.  The  Cash  account  is  debited  with  $27.63  to  show  the  amount  of  cash 

received  by  the  business. 

4.  The  Cash  account  is  credited  with  $47.50  to  show  the  amount  of  cash  paid 

out  by  the  business. 

5.  The  Cash  account  is  debited  with  $250.11  to  show  the  amount  of  cash 

received  by  the  business. 

6.  The  Cash  account  is  credited  with  $4.50  to  show  the  amount  of  cash  paid 

out  by  the  business. 
8.     The  Cash  account  is  debited  with   $125.00  to  show  the  amount  of  cash 

received  by  the  business. 
10.     The  Cash  account  is  credited  with  $230.00  to  show  the  amount  of  cash 
paid  out  by  the  business. 

12.  The  Cash  account  is  debited  with  $432.65  to  show  the  amount  of  cash 

received  by  the  business. 

13.  The  Cash  account  is  credited  with  $12.45  to  show  the  amount  of  cash  paid 

out  by  the  business. 


14 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Questions:  1.  \Miat  was  the  total  ainount  of  cash  received?  2.  What  M-as  the  total 
amount  of  cash  paid  out?     3.  How  much  cash  remains  on  hand? 

The  result  of  the  Cash  account  shows  the  amount  of  cash  on  hand.  This  is  found  liy 
taking  the  difference  between  the  amount  of  cash  received  and  the  amount  of  cash  paid  out. 

It  is  evident  that  the  debit  side  of  the  Cash  account  will  be  larger  than  the  credit  side 
since  it  is  impos.sible  to  pay  out  more  monej-  than  the  ])usiness  receives. 

This  cash  on  hand  is  a  value  which  the  business  owns  and  is  known  as  an  asset.  Since  the 
result  of  the  Cash  account  shows  the  amount  of  cash,  if  any,  on  hand,  the  Cash  account  is 
known  as  an  asset  account. 

An  asset,  frequently  known  as  a  resource,  is  any  item  of  value  owned  by  the  business. 

Proof  of  the  Amount  of  Cash  on  Hand. — The  proving  of  the  amount  of  cash  on  hand  con- 
sists in  finding  the  difference  between  the  total  amounts  of  cash  received  and  paid  out  as  shown 
by  the  Cash  account,  and  comparing  this  with  the  amount  of  money  and  other  cash  items  on 
hand. 

Proof  of  the  Amount  of  Cash  Illustrated 


Illustration  4 


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Balancing  the  Cash  Account. — The  Cash  account  is  balanced  as  follows: 

1.  Add  or  foot  in  small  pencil  figures  the  amount  columns  of  the  account. 

2.  Ascertain  the  amount  of  the  balance  by  subtracting  the  credit  from  the  debit  side. 
Determine  the  difference  by  mental  subtraction  if  possible. 

3.  In  the  explanation  space  on  the  debit  side  of  the  account  and  on  the  same  hne  with  the 
last  amount,  enter  the  difference  between  the  two  sides  of  the  account  in  .small  figures  as 
shown  in  Illustration  2. 

4.  Next  write  this  balance  on  the  credit  side  in  red  ink,  dating  it  the  13th,  the  date  of 
balancing  the  account.     Write  Balance  in  the  explanation  column. 

5.  Draw  a  single  red  line  across  the  money  column  underneath  the  lowest  item  of  the 
account.  Draw  another  single  red  line  on  a  level  with  the  first  one  across  the  other  money 
column  on  the  opposite  side  of  the  account. 

0.  Write  the  total  of  each  column  in  iJack  ink  in  the  space  beneath  the  single  horizontal 
red  lines. 

7.  Draw  double  red  lines  below  the  sums  or  footings  across  all  columns  except  the  explana- 
tion spaces. 

8.  Write  the  balance,  in  l)lack  ink,  below  the  double  red  ruling,  on  the  debit  side  of  the 
account  under  the  next  succeeding  business  date  as  shown  in  Illustration  3. 


THE  CASH  ACCOUNT 


15 


The  Use  of  Red  Ink.— The  use  of  red  ink  in  bookkeeping  work  is  entirely  optional  with 
the  bookkeeper,  or  the  one  who  has  charge  of  the  bookkeeping  work.  All  suggestions  regarding 
its  use  in  this  text  conform  to  the  conventional  practice,  and  are  advised  for  the  exercises  in 

this  text. 

Ciphers  in  the  Cents  Column.— When  the  amount  to  be  written  consists  of  an  even  number 
of  dollars,  write  two  ciphers  in  the  cents  column  unless  otherwise  instructed  by  your  teacher. 
While  some  bookkeepers  place  a  dash  or  leave  the  cents  column  blank  when  the  amount  to  be 
written  is  an  even  number  of  dollars,  the  better  practice  is  to  write  the  two  ciphers  in  the 
cents  column  as  shown  in  the  model  Cash  account  (Illustration  3). 

Exercises  in  Ruling.— Before  proceeding  further  in  the  study  of  accounts  it  would  be 
well  for  the  student  to  be  able  to  rule  neatly  and  correctly,  as  good  mechanical  work  is  essential 
in  bookkeeping. 

In  ruling  with  ink,  see  to  it  that  the  beveled  edge  of  the  ruler  is  next  to  the  paper  so  that 
the  point  of  the  pen,  when  drawn  across  the  page,  does  not  come  in  contact  with  the  ruler. 
The  ruling  should  be  made  without  blotting  the  page  or  making  heavy  or  ragged  lines. 

First  RuUng  Exercise.— Take  a  sheet  of  ledger  paper  and  practice  the  following  ruhng 
exercise  until  you  have  a  perfect  page.  Let  the  ledger  paper  lie  in  its  usual  position  on  the 
desk,  as  if  you  were  about  to  write  on  it.  Hold  your  pen  vertically  with  the  flat  part  at  right 
angles  to  the  ruler.  Draw  the  pen  from  left  to  right,  holding  it  against  the  beveled  edge  of 
the  ruler.  Do  not  lift  the  pen  until  the  line  is  finished.  The  single  ruling  and  the  first  hne 
of  each  double  ruling  should  be  placed  exactly  on  the  light  blue  lines  of  the  paper.  In  making 
double  rulings  the  position  of  the  ruler  should  not  be  changed  in  order  to  make  the  second 
line,  but  change  the  position  of  your  pen  by  inclining  the  top  of  the  holder  a  little  farther  from 
you.  By  following  this  suggestion  you  will  have  little  difficulty  in  making  the  two  fines  close 
together  and  parallel. 


The  single  addition  lines  cross  the  money  columns  only,  the  double  closing  fines  cross 
the  entire  page  except  the  explanation  columns. 


16  BOOKKEEPING  FOR  MODERN  BUSINESS 

Second  Ruling  Exercise. — On  a  sheet  of  ordinary  ruled  writing  paper,  draw  a  line  across 
the  page  as  follows : 

Single  line: 

Continue  the  ruling  until  you  have  ruled  a  line  on  every  blue  line  of  the  page. 

Third  Ruling  Exercise. — On  another  sheet  of  ordinary  ruled  writing  paper,  draw  a  single 
line  on  the  blue  line,  and  a  second  line  just  underneath  the  first.  You  now  have  double  or 
parallel  lines  across  the  page. 

Double  or  parallel  lines:  

Continue  this  ruling  until  you  have  ruled  both  sides  of  the  paper. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then  the 
date.  Add  each  column  in  small  pencil  figures  or  "pencil  foot,"  as  they  say,  and  balance  the 
accounts.  After  the  accounts  have  been  ruled,  bring  down  the  balance  under  the  date  of  the 
next  .succeeding  bu.siness  day  as  shown  in  the  model  Cash  accoimt.  When  the  examples  are 
completed,  hand  your  work  to  your  instructor  for  examination  and  approval. 

Exercise  1 

February  1.  Received  cash  from  the  proprietor,  $3,200.00. 

2.  Paid  James  Smith  for  merchandise,  .$846.12. 

3.  Paid  cash  for  rent,  $55.00. 

4.  Received  from  cash  sales  of  merchandise,  $411.89. 

5.  Paid  cash  for  postage  stamps,  $6.50. 

6.  Paid  cash  for  merchandi.se  purchased  to-day,  $1,126.21. 

8.  Received  from  cash  sales  to-day,  $398.98. 

9.  Received  from  J.  K.  Howell,  cash,  $268.78. 

11.  Sold  merchandise  for  cash,  $112.68. 

12.  Bought  merchandise  for  cash,  $568.50. 

13.  Paid  cash  for  stationery,  $16.58. 

Questions:  1.  What  items  are  entered  on  the  debit  side  of  the  Cash  account?  On 
the  credit  side?  2.  What  was  the  total  amount  of  cash  received?  3.  What  was  the  total 
amount  of  cash  paid  out?  4,  How  much  cash  remains  on  hand?  5.  Can  the  credit  side  of  the 
Cash  account  be  greater  than  the  debit  side?  Explain  fully.  6.  Analyze  each  transaction 
following  the  method  used  in  analyzing  the  model  Cash  account. 

Exercise  2 

March  1.  Received  cash  from  George  Gray,  $2,500.00. 

2.  Paid  cash  for  books  and  stationery,  $21.42. 

3.  Paid  cash  for  rent,  .$65.00. 

4.  Sold  merchandise  for  cash,  $125.21. 

5.  Received  from  cash  sales  to-day,  .$432.83. 

6.  Bought  merchandise  for  cash,  $321.67. 

8.  Paid  Thomas  Brown  cash  for  merchandise  purchased  to-day,  $217.71. 

10.  Received  cash  for  merchandi.se  sold  to-day,  $345.67. 

12.  Paid  cash  for  services,  $15.00. 

13.  Received  from  cash  sales  to-day,  $175-79. 


PERSONAL  ACCOUNTS  17 

Questions:  1.  What  was  the  total  amount  of  cash  received?  2.  What  was  the  total 
amount  of  cash  paid  out?  3.  How  much  cash  remains  on  hand?  4.  Analyze  each  transaction 
following  the  method  used  in  analyzing  the  model  Cash  account. 

Exercise  3 

April  1.  Received  from  George  Bond,  cash,  $4,000.00. 

2.  Paid  cash  for  rent,  $70.00. 

3.  Paid  cash  for  stationery,  $15.00. 

4.  Paid  cash  for  merchandise  purchased  to-day,  $1,200.00. 

5.  Received  cash  for  merchandise  sold  to-day,  $627.17. 

6.  Paid  cash  for  merchandise  purchased  to-day,  $1,560.11. 

8.  Received  from  H.  W.  Wright,  cash,  $250.24. 

9.  Cash  sales  of  merchandise  to-day,  $724.32. 

10.  Paid  advertising  bill,  $27.42. 

11.  Cash  sales  of  merchandise  to-day,  $246.32. 

12.  Paid  cash  for  merchandise  purchased  to-day,  $211.27. 

13.  Cash  sales  of  merchandise  to-day,  $229.92. 
15.  Received  from  T.  M.  Moore,  cash,  $175.22. 

17.     Paid  cash  for  merchandise  purchased  to-day,  $160.17. 

Questions:  1.  What  was  the  total  amount  of  cash  received?  2.  What  was  the  total 
amount  of  cash  paid  out?  3.  How  much  cash  remains  on  hand?  4.  When  is  the  Cash  account 
debited?  5.  When  is  the  Cash  account  credited?  6.  What  is  the  object  of  keepmg  a  Cash 
account?  7.  Analyze  each  transaction  following  the  method  used  in  analyzing  the  model 
Cash  account.  8.  Read  from  your  Cash  account  the  history  of  the  transactions,  i.  e.,  state 
what  transaction  gave  rise  to  each  ledger  entry. 

PERSONAL   ACCOUNTS 

Personal  accounts  are  accounts  kept  with  individuals,  firms,  and  corporations  with  which 
the  business  has  deahngs.  They  are  divided  into  two  classes:  one  class  shows  the  result  of 
transactions  with  persons  to  whom  merchandise  has  been  sold,  known  as  Accounts  with 
Customers,  and  the  other  class  shows  the  result  of  transactions  with  those  from  whom 
merchandise  has  been  purchased,  known  as  Accounts  with  Creditors. 

PERSONAL  ACCOUNTS  WITH  CREDITORS 

The  object  of  keeping  a  Personal  account  is  to  group  together  all  our  dealings  with  a  certain 
person,  firm,  or  corporation.  This  account  will  show  the  value  given  to  or  received  from  the 
person,  firm,  or  corporation. 

Illustrative  Exercise 

Transactions  with  R.  D.  Smith,  345  Fourth  Ave.,  Pittsburgh,  Pa. 

February  1.  Bought  merchandise  from  him  on  account,  $250.00. 

3.  Bought  merchandise  from  him  on  account  at  10  days,  $150.00. 

8.  Paid  him  cash  on  account,  $250.00. 

9.  Bought  merchandise  from  him  on  account,  $345.11. 
11.  Paid  him  cash  to  apply  on  account,  $100.00. 

13.     Paid  him  cash  to  apply  on  account,  $50.00. 


18 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Illustration  5 


^^S^^^i.<A^t^  /^^^^^-£yr 


■■^^^f^z5ri2^Wi^£$C' 


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Observations :  Debit  a  porsonal  account  to  show  that  a  person  has  received  value  ^rom  the 
business. 

Credit  a  personal  account  to  show  that  a  person  has  given  value  to  the  business. 

Analysis  of  R.  D.  Smith's  Personal  Account: 

February  1.     Mr.  Smith's  account  is  credited  with  S250.00  to  show  the  value  of  the 
merchandise  which  he  gave  to  the  business. 
3.     Mr.  Smith's  account  is  credited  with  SloO.OO  to  show  the  value  of  the 
merchandise  which  he  gave  to  the  business. 

8.  Mr.  Smith's  account  is  debited  with  S250.00  to  show  that  he  has  received 

value  (cash)  from  the  business. 

9.  Mr.  Smith's  account  is  credited  with  $345.11  to  show  the  value  of  the 

merchandise  which  he  gave  to  the  business. 
11.     Mr.  Smith's  account  is  debited  with  $100.00  to  show  that  he  has  received 

value  (cash)  from  the  business. 
13.     Mr.  Smith's  account  is  debited  with  $50.00  to  show  that  he  has  received 

value  (cash)  from  the  business. 

R.  D.  Smith's  account  shows  that  he  has  given  the  business  merchandise  valued  at 
$250.00  for  which  he  received  payment;  also  merchandise  valued  at  $150.00  for  which  he 
received  payment;  and  merchandise  valued  at  $345.11  for  which  he  has  not  been  paid. 

The  result  of  R.  D.  Smith's  account  shows  that  the  business  owes  him  $345.11. 

The  result  of  a  personal  account  shows  the  amount  owed  to  the  business  or  b}-  the  busi- 
ness.    The  result  is  found  bj'^  taking  the  difference  between  the  two  sides  of  the  account. 

If  the  credit  side  of  a  personal  account  is  the  larger,  the  account  shows  that  the  person 
has  given  more  value  to  the  business  than  he  has  received  from  the  business,  hence  the  business 
owes  him.  A  person  or  firm  which  has  given  more  value  to  the  business  than  it  has  received 
from  the  business  is  known  as  a  creditor. 

A  creditor  is  one  who  is  owed  or  one  who  has  given  credit  to  another. 

The  abbreviation  for  creditor  is  Cr.,  and  refers  only  to  persons.  When  used  in  reference 
to  an  impersonal  account,  such  as  the  Cash  account,  it  denotes  only  the  position  an  item 


PERSONAL  ACCOUNTS  19 

occupies  in  the  account.    Cash  could  not  owe  or  be  owed  since  it  belongs  to  the  owner  of  the 
business  and  it  is  in  his  possession. 

The  result  of  Mr.  Smith's  account  shows  that  the  business  owes  him  $345.11;  this  balance 
is  a  debt  or  obligation  of  the  business  and  is  known  as  a  liability. 

The  liabilities  of  a  business  consist  of  all  its  debts  or  obligations. 

When  the  credit  side  of  a  personal  account  is  the  larger,  showing  that  the  business  owes 
the  person,  the  account  is  known  as  a  liability  account  or  an  account  payable. 

Accounts  Payable. — Mr.  Smith's  account  is  called  an  account  payable,  because  the 
amount  of  his  balance,  $345.11,  is  owed  by  the  business. 

Balancing  Personal  Accounts. — The  proper  ruling  for  personal  accounts  depends  some- 
what upon  the  nature  of  the  business  transacted  Usually  personal  accounts  are  not  bal- 
anced in  a  foi-mal  way  like  the  Cash  account  except  when  payments  are  made  without  applying 
to  any  particular  bill. 

When  full  payment  for  a  particular  purchase  or  vsale  is  made,  either  by  a  single  payment 
or  in  instalments,  the  account  may  be  ruled,  by  drawing  a  single  red  Une  across  the  money 
column  on  each  side,  at  the  place  where  the  debit  and  credit  sides  are  equal  and  balance  (see 
Illustration  5).  Observe  the  rulings  showing  a  balance  of  $345.11  in  Mr.  Smith's  account  (see 
Illustration  5),  and  a  balance  of  $250.00  in  Mr.  Martin's  account  (see  Illustration  7). 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then  the 
date.  Rule  out  the  items  that  balance  as  the  balancing  entries  are  made  in  a  way  similar  to 
the  model  account  of  R.  D.  Smith. 

Exercise  4 

Transactions  with  Wilham  Saile  &  Co.,  234  Broadway,  New  York. 

May  1.  Bought  merchandise  from  them  on  account,  $654.17. 

3.  Bought  merchandise  from  them  on  account  at  10  days,  $326.98. 

6.  Paid  them  cash  on  account,  $400.00. 

9.  Bought  merchandise  from  them  on  account,  $534.45. 

11.  Paid  them  cash  for  balance  of  invoice  of  the  1st,  $254.17.     (Rule  out  balancing 

items.) 

13.  Paid  them  cash  for  invoice  of  the  3d,  $326.98.     (Rule  out  balancing  items.) 

17.  Bought  merchandise  from  them  on  account,  $638.24. 

21.  Bought  merchandise  from  them  on  account  at  20  days,  $300.00. 

27.  Paid  them  cash  in  part  payment  of  invoice  of  the  9th,  $300.00. 

31.  Paid  them  cash  for  balance  of  invoice  of  the  9th,  $234.45. 

Questions:  1.  Wlien  is  a  personal  account  debited?  2.  When  is  a  personal  account 
credited?     3.  When  the  credit  side  of  a  personal  account  is  the  larger,  what  does  it  show? 

4.  Analyze  each  transaction  following  the  method  used  in  analyzing  R.  D.  Smith's  account. 

5.  Read  from  your  account  the  history  of  the  transactions,  2.  e.,  state  what  transaction  prob- 
ably gave  rise  to  each  ledger  entry. 


20 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Exercise  5 

Transactions  with  Earl  Rand,  6425  Dittman  St.,  Louisville,  Ky. 

June  1.  Bought  merchandise  from  him  on  account,  $703.24. 

3.  Bought  merchandise  from  him  on  account  at  10  days  S462.89. 

6.  Paid  him  cash  on  account,  S.3.")0.00. 

9.  Bought  merchandise  from  him  on  account,  $544.30. 

11.  Paid  him  cash  for  balance  of  invoice  of  the  1st,  $353.24. 

12.  Bought  merchandise  from  him  on  account,  $411.27. 

13.  Paid  him  cash  for  invoice  of  the  3d,  $462.89. 

17.  Bought  merchandise  from  him  on  account,  $428.36. 

19.  Bought  merchandise  from  him  on  account  at  30  days,  $278.33. 

21.  Bought  merchandise  from  him  on  account  at  20  days,  $450.09. 

27.  Paid  him  cash  in  part  payment  of  invoice  of  the  9th,  $400.00. 

31.  Paid  him  cash  for  lialance  of  invoice  of  the  9th,  $144.30. 

Questions :  1 .  Did  vou  rule  out  the  items  that  balance  as  the  balancing  entries  were  made? 
2.  Who  is  a  creditor  of  the  business?  3.  Define  liability.  4.  Analyze  each  transaction  fol- 
fowing  the  method  used  in  analyzing  Exercise  4.     5.  Define  accounts  payable. 

Exercise  6 

Read  from  the  account  the  history  of  the  transactions,  i.  e.,  state  what  transaction 
probably  gave  rise  to  each  ledger  entry. 


Illustration  6 


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PERSONAL  ACCOUNT  WITH  CUSTOMERS 

Illustrative  Exercise 

Transactions  with  John  C.  Martin,  124  Market  St.,  Camden,  N.  J. 

January  1.  Sold  him  merchandise  on  account,  $120.00. 

3.  Sold  him  merchamlise  on  account  at  10  days,  $75.00. 

8.  Received  cash  for  bill  of  the  1st,  $120.00. 

9.  Sold  him  merchandise  on  account,  $250.00. 

11.     Received  cash  to  apply  on  bill  of  the  3d,  $50.00. 
13.     Received  cash  for  balance  of  bill  of  the  3d,  $25.00. 


PERSONAL  ACCOUNTS 


21 


Illustration  7 


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Observations :  Dehii  a  personal  account  to  show  that  a  person  has  received  value  from  the 
business. 

Credit  a  personal  account  to  show  that  a  person  has  given  value  to  the  business. 

Analysis  of  John  C.  Martin's  Personal  Account: 

January  1.     Mr.  Martin's  account  is  debited  with  $120.00  to  show  the  value  of  the 
merchandise  which  he  received  from  the  business. 
3.     Mr.  Martin's  account  is  debited  with  $75.00  to  show  the  value  of  the 
merchandise  which  he  received  from  the  business. 

8.  Mr.  Martin's  account  is  credited  with  $120.00  to  show  the  amount  (value) 

of  cash  which  he  gave  to  the  business. 

9.  Mr.  Martin's  account  is  debited  with  $250.00  to  show  the  value  of  the 

merchandise  which  he  received  from  the  business. 
11.     Mr.  Martin's  account  is  credited  with  $50.00  to  show  the  amount  (value) 

of  the  cash  which  he  gave  to  the  business. 
13.     Mr.  Martin's  account  is  credited  with  $25.00  to  show  the  amount  (value) 

of  the  cash  which  he  gave  to  the  business. 

John  C.  Martin's  account  shows  that  he  has  received  merchandise  from  the  business 
valued  at  $120.00  which  he  paid  in  cash;  also  merchandise  valued  at  $75.00  which  he  paid  in 
cash;  and  merchandise  valued  at  $250.00  which  he  still  owes. 

The  result  of  John  C.  Martin's  account  shows  that  he  owes  the  business  $250.00. 

The  result  of  a  personal  account  shows  the  amount  owed  to  the  business  or  by  the  busi- 
ness.    The  result  is  found  by  taking  the  difference  between  the  two  sides  of  the  account. 

If  the  debit  side  of  a  personal  account  is  the  larger,  the  account  shows  that  the  person 
has  received  more  value  from  the  business  than  he  has  given  to  the  business,  hence  he  owes  the 
business.  A  person  or  firm  which  has  received  more  value  from  the  business  than  it  has  given 
to  the  business  is  known  as  a  debtor. 

A  debtor  is  one  who  owes  or  is  in  debt  to  another. 

The  abbreviation  for  debtor  is  Dr.,  and  refers  only  to  persons.  When  used  in  reference 
to  an  impersonal  account,  such  as  the  Cash  account,  like  the  abbreviation  for  creditor,  it 
denotes  only  the  position  an  item  occupies  in  an  account. 


22  BOOKKEEPING  FOR   MODERN  BUSINESS 

The  result  of  Mr.  Martin's  account  shows  that  he  owes  the  business  $250.00.  This  bal- 
ance is  a  value  which  the  business  owns  and  is  known  as  an  asset. 

An  asset,  we  remember,  is  anything  of  value  owned  by  the  business. 

Wlien  the  debit  side  of  a  personal  account  is  the  larger,  showing  that  the  person  is  indebted 
to  the  business,  the  account  is  known  as  an  asset  account,  or  an  account  receivable. 

Accounts  Receivable. — Mr.  Martin's  account  is  called  an  account  receivable,  because  the 
amount  of  his  balance,  S250.00,  is  to  be  received  by  the  lousiness. 

It  has  been  observed  that  the  result  or  balance  shown  by  a  personal  account  is  cither  an 
asset  or  a  liability.  If  the  debit  side  is  the  larger,  it  shows  the  amount  owed  to  the  business, 
which  is  an  asset.  If  the  credit  side  is  the  larger,  it  shows  the  amount  owed  by  the  business, 
which  is  a  liability. 

Personal  accounts  with  debtors  always  show  debit  balances  and  are  known  as  asset  accounts. 

Personal  accounts  with  creditors  always  show  credit  balances  and  are  known  as  liability 
accounts,  thus: 

A  Personal  Account  which  shows  a 

Debit  Balance :  represents  a  Debtor  or  an  Asset  Account. 
Credit  Balance:  represents  a  Creditor  or  a  Liability  Account. 

Exercise  7 

Transactions  with  H.  R.  Shaff,  946  Main  St.,  Pittsburgh,  Pa. 

July  1.  Sold  him  merchandise  on  account,  $200.00. 

3.  Sold  him  merchandise  on  account  at  10  days,  8112.75. 

8.  Received  cash  from  him  for  bill  of  the  1st,  $200.00.     (Rule  out  balancmg  items.) 

9.  Sold  him  merchandise  on  account,  $326.50. 

13.  Received  cash  from  him  in  full  payment  of  bill  of  the  3d,  $112.75. 

15.  Sold  him  merchandise  on  account,  $360.00. 

18.  Received  cash  from  him  in  part  payment  of  bill  of  the  9th,  $200.00. 

21.  Sold  him  merchandise  on  account  at  20  days,  $125.00. 

31.  Received  cash  from  him  for  balance  of  bill  of  the  9th,  $126.50. 


Questions:  1.  When  is  a  personal  account  credited?  2.  When  is  a  personal  account 
debited?  3.  When  the  debit  side  of  a  personal  account  is  the  larger,  what  does  it  show? 
4.  Analyze  each  transaction  following  the  method  used  in  analyzing  John  C.  Martin's 
account.  5.  Read  from  your  account  the  history  of  the  transactions,  2.  e.,  state  what  trans- 
action probably  gave  rise  to  such  a  ledger  entry. 


Exercise  8 

Transactions  with  J.  K.  Johnson,  4702  Penn  St.,  Cincinnati.  Ohio. 

August   1.  Sold  him  merchandise  on  account,  $350.00. 

3.  SoUl  him  mcM-chandise  on  account  at  10  days,  $572.11. 

8.  deceived  cash  from  him  for  i)ill  of  the  1st,  $350.00. 

13.  Received  cash  from  him  in  full  payment  of  bill  of  the  3d,  $572.11. 

15.  Sold  him  merchaiHJisc  on  account,  $().30.00. 

18.  Received  cash  from  liim  in  part  payment  of  l)ill  ofthe  15th,  $300.00. 

21.  Sold  him  merchandise  on  account  at  20  days,  $125.00. 

31.  Received  cash  from  him  for  balance  of  l)ill  of  the  15th,  $330.00. 


PROMISSORY  NOTES 


23 


Questions:  1.  Did  you  rule  out  the  items  that  balance  as  the  balancing  entries  were 
made?  2.  Who  is  a  debtor  of  the  business?  3.  Define  asset.  4.  Is  this  account  an  account 
receivable  or  an  account  payable?  Explain.  5.  Analyze  each  transaction  following  the 
method  used  in  analyzing  Exercise  7. 


Exercise  9 

Read  from  the  account  the  history  of  the  transactions,  i.  e.,  state  what  transaction 
probably  gave  rise  to  each  ledger  entry. 


Illustration  8 


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Exercise  10 

Interpret  the  following  accounts,  i.  e.,  state  which  are  asset  accounts  and  which  are 
hability  accounts;  which  men  are  debtors  to  the  business  and  w^hich  are  creditors,  and  give 
full  reasons  in  each  case : 

Name  of  the  Account  Debit  Credit 

(1)  B.S.Williams $716.16  $216.16 

(2)  Thomas  Lawson 346.33  446.33 

(3)  William  Brown 450.00  200.00 

(4)  R.  S.  Rickard 350.00  700.00 

(5)  M.  S.  Smith 678.90 

(6)  L.  L.  Tucker 923.56 

(7)  Cash 945.67  440.17 

PROMISSORY  NOTES 

A  Promissory  Note  is  a  written  promise  to  pay  a  certain  sum  of  money  at  a  specified  time. 

Parties  to  a  Promissory  Note. — There  are  always  two  original  parties  to  a  note:  the  maker 
and  the  payee. 

The  Maker  is  the  person  who  signs  the  note  and  who  promises  to  pay  the  amount  named 
in  the  note. 

The  Payee  is  the  person  to  whom  the  note  is  made  payable. 

Notes  are  generally  given  and  received  in  settlement  of  personal  accounts  changing  an 
oral  promise  to  a  written  promise;  in  place  of  cash  for  the  purchase  or  sale  of  merchandise; 
or  when  money  is  borrowed  or  lent. 


24 


Illustration  9 


BOOKKEEPING  FOR   MODERN  BUSINESS 
Promissory  Notes  Illustrated  (Two  Forms) 


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The  above  note  indicates  that  the  maker,  George  L.  Moore,  is  indebted  to  the  payee, 
Henry  Bruce,  and  agrees,  in  writing,  to  pay  the  face  value  of  the  note,  $118.56,  on  October 
18,  19—. 

The  Face  Value  of  a  Note. — The  amount  written  in  the  body  of  the  note  at  the  time  (he 
note  is  issued  by  the  maker  is  known  as  the  face  value  of  the  note. 

Subsequent  Parties  to  a  Note. — Notes  may  be  transferred  by  the  payee  to  another  holder, 
a  third  person,  to  whom  the  promise  is  transferred.  This  transfer  is  effected  by  endorsement 
by  the  paj'ee  or  holder,  and  ddiveiy  to  the  new  ()\vn(>r. 

Endorsement  consists  in  the  payee's  or  holder's  writing  his  name  across  the  back  of  the 
note,  with  or  without  words  indicating  to  whom  the  paper  is  transferred.  The  person  trans- 
ferring the  paper  is  the  endorser.     The  person  to  whom  the  paper  is  transferred  is  the  endorsee. 

When  a  note  can  be  transfcncd  fiom  one  jiarty  to  another,  as  indicated  l)y  the  words 
to  the  order  of,  it  is  said  to  be  necjotiablr.      There  are  otlicr   foinis  of  ni>fi;otiabl(>  }xiper  such 


PROMISSORY  NOTES 


25 


as  checks,  drafts,  trade  acceptances,  bills  of  exchange,  etc. — all  of  which  are  to  be  explained 
later. 

Thus,  in  the  illustration  given,  Henry  Bruce,  the  payee,  may  desire  to  transfer  the  note 
to  William  Jones.     He  may  do  so  by  writing  on  the  back  of  the  note: 

Illustration  10 


or  by  simply  writing  his  name,  thus : 
Illustration  11 


(7) 


A^^i^i>c^c^ 


When  a  note  is  transferred  by  endorsement,  the  endorser  becomes  ■  responsible  to  the 
party  to  whom  he  transfers  it ;  that  is,  he  agrees  to  redeem  it  if  the  maker  does  not. 

Notes  Receivable  is  a  title  given  to  an  account  in  which  are  recorded  all  notes  and  other 
written  promises  of  others  received  by  the  business. 

Notes  Payable  is  the  title  given  to  an  account  in  which  are  recorded  all  notes  and  other 
written  promises  issued  or  given  by  the  business. 

THE  NOTES  RECEIVABLE  ACCOUNT 

The  object  of  keeping  a  Notes  Receivable  account  is  to  show  the  amount  of  notes  and 
other  written  promises  received  from  others,  and  the  amount  of  those  which  have  been 
redeemed,  returned,  or  otherwise  disposed  of. 

Illustrative  Exercise 

Transactions  relating  to  the  Notes  Receivable  account  in  the  books  of  L.  L.  Tucker. 

October  1.     The  proprietor,  L.  L.  Tucker,  has  invested  a  note  which  he  holds  against 
A.  B.  Riker,  $275.45. 

2.  Sold  George  Taylor,  on  his  10-day  note,  merchandise,  $75.00. 

3.  Sold  L.  B.  Reed,  on  his  15-day  note,  merchandise,  $234.56. 
8.     A.  B.  Riker  pays  his  note  due  to-day,  $275.45. 

10.     Sold  G.  H.  Jones,  on  his  30-day  note,  merchandise,  $89.29. 
12.     George  Taylor  pays  his  note  due  to-day,  $75.00. 


26 

Illustration  12 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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Observations:  Dehit  the  Notes  Receivable  account  to  show  the  amount  (at  face  value) 
of  all  notes  and  other  written  promises  of  others  received  by  the  business. 

Credit  the  Notes  Receivable  account  to  show  the  amount  (at  face  value)  of  all  notes 
and  other  written  promises  of  others  returned  or  otherwise  disposed  of  by  the  business. 


Analysis  of  the  Model  Notes  Receivable  Account: 


October  1. 


3. 


10. 


12. 


The  Notes  Receivable  account  is  debited  with  $275.45  to  show  the 

(at  face  value)  of  the  note  received  by  the  business. 
The  Notes  Receivable  account  is  debited  with  $75.00  to  show  the 

(at  face  value)  of  the  note  received  by  the  business. 
The  Notes  Receivable  account  is  debited  with  $234.56  to  show  the 

(at  face  value)  of  the  note  received  by  the  business. 
The  Notes  Receivable  account  is  credited  with  $275.45  to  show  the 

(at  face  value)  of  the  note  returned  b}-  the  business. 
The  Notes  Receivable  account  is  debited  with  $89.29  to  show  the 

(at  face  value)  of  the  note  received  by  the  business. 
The  Notes  Receivable  account  is  credited  with  $75.00  to  show  the 

(at  face  value)  of  the  note  returned  by  the  business. 


amount 
amount 
amount 
amount 
amount 
amount 


The  result  of  this  Notes  Receivable  account  shows  that  the  business  has  two  notes  on 
hand,  their  face  values  being  $234.56  and  $89.29  respectively. 

The  result  of  a  Notes  Receivable  account  shows  the  amount  (at  face  value)  of  all  notes 
and  other  written  promises  on  hand.  This  is  found  b}-  taking  the  difference  between  the  two 
sides  of  the  account. 

Since  the  result  of  the  Notes  Receivable  account  shows  the  amount  of  value  which  others 
owe  the  business  on  their  written  pi'oinisc^  to  pay,  this  balance  is  an  asset  of  the  business; 
hence,  the  Notes  Receivable  account  is  known  as  an  asset  account. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  When  the  examples  are  com- 
pleted, hand  your  work  to  your  instructor  for  examination  and  approval. 


PROMISSORY  NOTES 


27 


Exercise  11 

September  1,  We  receive  a  note  at  10  days  for  -1250.00  from  A.  H.  Wilson. 

3.  We  receive  a  note  at  15  days  for  S475.00  from  C.  J.  Bowman. 

5.  We  receive  a  note  at  20  days  for  S175.00  from  W.  0.  Weaver. 

11.  A.  H.  Wilson  pays  his  note  due  to-dav,  S250.00. 

12.  We  receive  a  note  at  10  days  for  $2lf.00  from  A.  B.  Riker. 
15.  We  receive  a  note  at  15  days  for  $172.00  from  J.  H.  Gilson. 
18.  C.  J.  Bowman  pays  his  note  due  to-day,  .$475.00. 

22.     A.  B.  Riker  pays  his  note  due  to-day,  $211.00. 

24.  We  receive  a  note  at  1  month  for  S200.00  from  G.  A.  Taylor. 

25.  W.  O.  Weaver  pavs  his  note  due  to-da}^  S175.00. 

28.     We  receive  a  note^  at  60  days  for  $724.00  from  W.  A.  McBane. 
30.     J.  H.  Gilson  pays  his  note  due  to-day,  $172.00. 

Questions:  1.  When  is  the  Notes  Receivable  account  debited?  2.  When  is  the  Notes 
Receivable  account  credited?  3.  What  is  the  total  value  of  all  Notes  Receivable  on  hand? 
4.  Analyze  each  transaction  following  the  method  used  in  analj^zing  the  model  Notes 
Receivable  account. 

Exercise  12 

October  1.  We  receive  a  note  at  10  days  for  $250.00  from  George  L.  Brown, 

4.  We  receive  a  note  at  15  days  for  $475.00  from  B.  L.  George. 

8.  We  receive  a  note  at  20  days  for  .?400.00  from  Thomas  Green. 

11.  George  L.  Brown  pa3's  his  note  due  to-day,  $250.00. 

12.  We  receive  a  note  at  15  days  for  $725.00  from  William  Lowe. 
14.  W^e  receive  a  note  at  10  days  for  $222.00  from  R.  D.  Smith. 

17.  We  receive  a  note  at  1  month  for  $275.00  from  Charles  Cameron. 

19.  B.  L.  George  pays  his  note  due  to-day,  $475.00. 

24.  R.  D.  Smith  pavs  his  note  due  to-dav,  $222.00. 

24.  We  receive  a  note  at  90  days  for  $117.00  from  H.  R.  Shaff. 

27.  William  Lowe  pays  his  note  due  to-day,  $725.00. 

28.  Thomas  Green  pays  his  note  due  to-day,  $400.00. 

Questions:  1.  Did  you  rule  out  the  items  that  balance  as  the  balancing  entries  were 
made?  2.  Define  promissory  note.  3.  Who  is  the  maker  of  a  note?  The  payee?  4.  How 
may  the  paj^ee  transfer  a  note  to  another  party?     5.    Analyze  each  transaction. 

Exercise  13 

Write  the  following  promissory  notes  on  blank  paper,  after  the  form  shown  in  Illustra- 
tion 9,  and  present  them  to  your  instructor  for  examination  and  approval. 

1.  Write  a  note  dated  September  1,  19 — ,  payable  10  days  after  date,  in  favor  of  H.  R. 
Shaff  (payee)  for  $234.56,  made  by  R.  D.  Smith  (maker).     Payable  at  the  Citizens'  Bank. 

2.  Write  a  note  made  by  William  Lowe,  dated  September  12th  at  1  month,  in  favor  of 
B.  L.  George,  for  $1,122.33,  payable  at  the  Second  National  Bank. 

3.  Write  a  note  dated  September  24th,  payable  15  days  after  date,  in  favor  of  H.  W. 
Patten,  made  by  George  Taylor,  for  $1,000.00,  payable  at  the  Chemical  National  Bank. 

4.  Write  a  note  made  by  your  instructor,  dated  September  30th  at  30  days  after  date, 
in  favor  of  yourself,  for  $100.00,  payable  at  the  Commercial  Bank. 

THE    NOTES    PAYABLE    ACCOUNT 

The  object  of  keeping  a  Notes  Payable  account  is  to  show  the  amount  of  all  notes  and 
other  written  promises  issued  by  the  business  to  others,  and  also  the  amount  of  those  which 
have  been  redeemed  by  and  returned  to  the  business. 


28 


BOOKKEEPING   FOR  MODERN  BUSINESS 


Illustrative  Exercise 

Transactions  relating  to  the  Notes  Payable  account  in  the  books  of  Walter  Mansley 
October  1.     Gave  B.  J.  Rose  a  note  at  10  days  for  $556.00,  on  account. 

Gave  E.  B.  Race  a  note  at  20  clays,  on  account,  S24G.00. 

Paid  his  note  in  favor  of  B.  J.  Rose  due  to-day,  S556.00. 

Gave  George  Mumford  a  note  at  15  days,  on  account,  .'J260.00. 

Gave  Thomas  Moore  a  note  at  1  month,  on  account,  $112.00. 

Paid  liis  note  in  favor  of  George  Mumford  due  to-day,  $260.00. 

Paid  his  note  in  favor  of  E.  B.  Race  due  to-day,  $246.00. 


10. 
11. 
12. 
21. 
27. 
30. 


Illustration  13 


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3c 


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at-' 


Observations :  Credit  the  Notes  Payable  account  to  show  the  amount  (at  face  value)  of 
all  notes  and  other  written  promises  issued  by  the  business  to  others. 

Dehii  the  Notes  Payable  account  to  show  the  amount  (at  face  value)  of  all  notes  and 
other  written  promises  redeemed  by,  or  returned  to  the  business.  .; 

Analysis  of  the  Model  Notes  Payable  Account: 

October  1.     The  Notes  Payable  account  is  credited  with  $556.00  to  show  the  amount  (at 
face  value)  of  the  note  issued  by  the  business. 

10.  The  Notes  Payable  account  is  credited  with  $246.00  to  show  the  amount 

(at  face  value)  of  the  note  issued  by  the  business. 

11.  The  Notes  Payable  account  is  debited  with  $556.00  to  show  the  amount 

(at  face  value)  of  the  note  redeemed  by  and  returned  to  the  business. 

12.  The  Notes  Payable  account  is  credited  with  $260.00  to  show  the  amount 

(at  face  value)  of  the  note  issued  by  the  business. 
21.     The  Notes  Payable  account  is  credited  with  $112.00  to  show  the  amount 

(at  face  value)  of  tlie  note  issued  by  the  business. 
27.     The  Notes  Payal)le  account  is  debited  with  $2()0.00  to  show  the  amount 

(a1  face  value)  of  tli(>  note  redeemed  by  and  returned  to  the  business. 
30.     The  Notes  Payable  account  is  debited  with  .$246.00  to  show  the  amount 

(at  face  value)  of  the  note  redeemed  by  atul  returned  to  the  business. 

The  result  of  this  Notes  Payable  account  shows  that  the  business  has  one  outstanding 
note  for  $112.00. 


PROMISSORY  NOTES 


29 


The  result  of  a  Notes  Payable  account  shows  the  amount  (at  face  value)  of  all  notes  and 
other  written  promises  outstanding  against  the  business.  This  is  found  by  taking  the  difference 
between  the  two  sides  of  the  account. 

Since  the  result  of  the  Notes  Payable  account  shows  that  the  business  owes  $112.00  on 
its  written  promise  to  pay,  this  balance  is  a  liability  of  the  business,  hence  a  Notes  Payable 
account  is  known  as  a  liability  account. 

The  result  or  balance  of  the  Notes  Receivable  account  is  an  asset,  because  it  represents 
an  amount  which  the  business  will  receive,  and  the  result  or  balance  of  the  Notes  Payable 
account  is  a  liability  because  it  represents  an  amount  which  the  business  owes. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then 
the  date.  When  the  examples  are  complete,  hand  your  work  to  your  instructor  for  examination 
and  approval. 

Exercise  14 


We  gave  our  note  at  10  days  to  H.  J.  King  for  $247.00. 

We  gave  our  15-day  note  for  $726.00  to  George  Rowe. 

We  gave  our  note  at  20  days  for  $400.00  to  A.  H.  Wilson. 

We  paid  our  note  in  favor  of  H.  J.  King  due  to-day,  $247.00. 

We  gave  Walter  Roberts  our  note  at  10  days  for  $422.00. 

We  gave  our  10-day  note  for  $400.00  to  Thomas  Moore. 

We  gave  William  Saile  our  note  at  1  month  for  $500.00. 

We  paid  our  note  in  favor  of  George  Rowe  due  to-day,  $726.00. 

We  paid  Walter  Roberts  $422.00,  for  our  note  due  to-day. 

We  gave  our  90-day  note  for  $175.00  to  Morris  Reed. 

We  paid  our  note  in  favor  of  Thomas  Moore  due  to-day,  $400.00. 

We  paid  A.  H.  Wilson  $400.00  for  our  note  due  to-day. 


September  1. 
4. 
8. 
11. 
12. 
14. 
18. 
19. 
22. 
24. 
24. 
28. 

Questions:  1.  What  is  the  object  of  keeping  a  Notes  Payable  account?  2.  When  is  the 
Notes  Payable  account  debited?  3.  When  is  the  Notes  Payable  account  credited?  4.  What 
is  the  total  value  of  all  Notes  Payable  outstanding?  5.  Analyze  each  transaction  following 
the  method  used  in  analyzing  the  model  Notes  Payable  account. 


Exercise  15 

October  1.  Gave  our  note  at  10  days  for  $211.00  to  Stanley  Wilson. 

6.  Gave  our  15-day  note  to  R.  S.  Adair  for  $461.00. 

11.  Paid  Stanley  Wilson  $211.00  for  our  note  due  to-day. 

11.  Gave  A.  S.  Adams  our  20-day  note,  on  account,  for  $675.00. 

18.  Gave  our  3  months'  note  to  A.  E.  Dick  for  $275.00. 

21.  Paid  our  note  in  favor  of  R.  S.  Adair  due  to-day,  $461.00. 

23.  Gave  our  note  at  1  month  for  $246.17  to  H.  W.^  Wright. 

24.  Gave  our  90-day  note  for  $768.00  to  J.  K.  Scott. 

29.     Gave  our  note  at  10  days  to  George  Mills  for  $200.00. 

31.     Paid  our  note  in  favor  of  A.  S.  Adams  due  to-day,  $675.00. 

Questions :  1 .  Did  you  rule  the  items  that  balance  as  the  balancing  entries  were  made? 
2.  What  is  the  object  of  keeping  a  Notes  Payable  account?  3.  Define  liability.  4.  Analyze 
each  transaction  following  the  method  used  in  analyzing  Exercise  14.  5.  Read  from  your 
accounts  the  history  of  the  transaction,  i.  e.,  state  what  transactions  gave  rise  to  each  ledger 
entry. 


30  BOOKKEEPING  FOR  MODERN  BUSINESS 

Exercise  16 

Write  the  following  promissory  notes  on  blank  paper,  after  the  form  shown  in  Illustra- 
tion 9,  and  present  them  to  your  instructor  for  examination  and  approval. 

1.  Write  a  note  dated  September  1,  19—,  payable  10  days  after  date  for  $1,200.00,  in 
which  George  Mumford  is  the  maker  and  T.  B.  Ross  is  the  payee. 

2.  Write  a  note  for  H.  L.  Scott  dated  Octol)er  5,  19 — ,  payable  20  days  after  date  in 
favor  of  U.  S.  Grant,  for  .S239.89. 

3.  Write  a  note  dated  Octo])er  13,  19—,  at  20  days  in  favor  of  the  Commercial  Bank 
made  by  Harry  Blair,  for  $1,000.00,  payable  at  the  Commercial  Bank. 

4.  Write  a  note  dated  October  31,  19 — ,  at  3  months  in  favor  of  your  instructor  for 
$342.65,  made  by  yourself. 

Exercise  17    (Review) 

Transactions  relating  to  both  the  Notes  Receivable  and  the  Notes  Payable  accounts  in 
the  books  of  William  Dayer. 

November  1.     Gave  James  Ennis  a  note  at  10  days  for  $676.20,  on  account. 

2.     Sold  Harry  Blair,  on  his  10-day  note,  merchandise,  $321.41. 

6.     Gave  William  Ashton  a  note  at  20-days,  on  account,  $402.17. 

8.     Sold  Joseph  Feast er,  on  his  15-day  note,  merchandise,  $171.21. 

10.  He  gave  his  15-day  note  for  $721.86  to  Walter  Brown,  for  merchandise 

purchased  to-day. 

11.  Paid  his  note  in  favor  of  James  Ennis  due  to-day,  $676.26. 

12.  Harry  Blair  paid  his  note  due  to-day,  $321.41. 

15.     He  received  a  note  at  15  days  for  $677.32  from  Thomas  Brown. 
19.     He  gave  his  note  at  60  days  to  R.  A.  Smith  for  $100.00. 

23.  Joseph  Feaster  paid  his  note  due  to-day,  $171.21. 

25.  Paid  his  note  in  favor  of  Walter  Brown  due  to-day,  $721.86. 

26.  He  paid  his  note  in  favor  of  William  Ashton  due  to-day,  $462.17. 

27.  He  received  a  note  at  1  month  for  $350.72  from  Harry  Blair. 

29.  He  gave  James  Ennis  his  note  at  60  days  for  $600.00. 

30.  Thomas  Brown  paid  his  note  due  to-day,  $877.32. 

Questions:  1.  What  is  the  total  value  of  all  Notes  Receivable  on  hand?  2.  What  is 
the  total  value  of  all  Notes  Payable  outstanding?  3.  Did  j^ou  rule  the  items  that  balance  as 
the  balancing  entries  were  made?     4.  Analyze  each  transaction. 

Exercise  18   (Review) 

Transactions  affecting  personal  accounts  in  the  books  of  Louis  Evans. 

December  1.     Bought  merchandise  of  George  Green,  1900  Chestnut  Street,  City,  on 

account,  $1,271.24. 
2.     Sold  merchandise  to  John  Thomas,  1244  Market  Street,  City,  on  account, 

.$311.81. 

6.  Paid  George  Green,  on  account,  $500.00. 

7.  John  Thomas  paid  him,  on  account,  $200.00. 

11.  Sold  John  Thomas  merchandise,  on  account,  $817.32. 

12.  Purchased  merchandise  of  George  Green,  on  account,  $1,511.21. 

17.  Paid  George  Green,  on  account,  $771.24. 

18.  John  Thomas  paid  liim,  on  account,  $111.81. 

24.  Bought  merchandise  of  George  Green,  on  account,  $781.22. 

25.  John  Tlioinas  paid  him,  on  account,  .$317.32. 

30.  Paid  George  Green,  on  account,  $511.21. 

31.  Sold  John  Thomas  merchandise,  on  account,  $300.00. 


MERCHANDISE  ACCOUNTS  31 

Questions:  1.  When  is  a  personal  account  debited?  2.  When  is  a  personal  account 
credited?  3.  When  the  debit  side  of  a  personal  account  is  the  larger,  what  does  it  show? 
The  credit  side?  4.  Is  George  Green's  account  an  account  receivable  or  an  account  payable? 
Explain. 

Exercise  19  (Review) 

Transactions  affecting  the  Cash  account  in  the  books  of  C.  H.  Hobson. 
January  1.     C.  H.  Hobson  began  business  by  investing  cash  $4,500.00. 

2.  Received  from  George  McKean  to  apply  on  account,  $250.00. 

3.  Paid  R.  M.  Grosser  $275.60  to  apply  on  account. 

4.  Paid  rent  for  month,  $85.00. 

6.  Cash  sales  of  merchandise,  $561.21. 

.    8.  Paid  J.  E.  Baker,  on  account,  $422.98. 

9.  Bought  merchandise  for  cash,  $1,671.43. 

10.  Sold  merchandise  for  cash,  $263.78. 

12.  Paid  R.  M.  Grosser,  on  account,  $230.00. 

14.  Paid  his  note  in  favor  of  B.  C.  King  due  to-day,  $400.00. 

16.  Louis  Webber  paid  him,  on  account,  $250.00. 

18.  George  McKean  paid  his  note  due  to-day,  $1,000.00. 

19.  Bought  merchandise  for  cash,  $650.00. 
21.  Paid  Brooks  &  Co.,  on  account,  $160.00. 

23.     Paid  his  note  in  favor  of  W.  O.  Weaver  due  to-day,  $350.00. 

25.  Bought  merchandise  for  cash,  $75.21. 

26.  Green,  Day  &  Co.  paid  their  note  due  to-day,  $750.00. 

28.  Received  from  Louis  McKnight,  on  account,  $175.00. 

29.  Bought  merchandise  for  cash,  $211.66. 

30.  Sold  merchandise  for  cash,  $511.32. 

31.  Received  from  Herbert  Lee,  on  account,  $210.00. 

Questions :  1 .  What  items  are  entered  on  the  debit  side  of  the  Cash  account?  On  the 
credit  side?  2.  What  was  the  total  amount  of  cash  received?  3.  What  was  the  total  amount 
of  cash  paid  out?  4.  How  much  cash  remains  on  hand?  5.  Can  the  credit  side  of  the  Cash 
account  be  greater  than  the  debit  side?  Why?  6.  Read  the  history  of  the  transactions  from 
this  Cash  account. 

Exercise  20  (Review) 

Interpret  the  following  accounts,  i.  e.,  state  which  are  asset  and  which  are  Hability 
accounts,  giving  full  reasons  in  each  case: 

Name  of  the  Account  Debit  Credit 

(1)  George  Mumford $500.00  $250.00 

(2)  Walter  Mansley 146. 12  546. 12 

(3)  Cash 890.34  300.34 

(4)  Notes  Receivable 1,234.67  "  234.67 

(5)  Notes  Payable 567.89  1,567.89 

(6)  J.  K.  Johnson 456.89 

(7)  Notes  Receivable 723.54 

(8)  Notes  Payable 1,123.72 

MERCHANDISE   ACCOUNTS 

Merchandise  is  a  general  term  given*  to  any  commodity  that  is  bought  for  the  purpose  of 
selhng  again  at  a  profit. 


32 


BOOKKEEPING  FOR  MODERN  BUSINESS 


The  principal  operations  in  conducting  a  mercantile  business  are  the  purchasing  and  sell- 
ing of  merchandise.  In  order  to  provide  an  accurate  record  of  these  operations,  two  accounts 
are  kept,  Merchandise  Purchases  and  Merchandise  Sales  accounts. 

THE  MERCHANDISE  PURCHASES  ACCOUNT 

The  object  of  keeping  a  Merchandise  Purchases  account  is  to  show  the  cost  of  merchandise 
purchased. 

Illustrative  Exercise 

Transactions  affecting  the  Merchandise  Purchases  account  in  the  books  of  R.  D.  Smith. 

September  1.  He  purchased  merchandise^  valued  at  $1,500.00. 

0.  He  paid  freifi;ht  charges,  812.84. 

12.  He  was  allowed  a  shortage  claim  on  merchandise  bought,  82.36. 

15.  He  was  allowed  a  rebate  for  an  overcharge  on  freight,  81.34. 

17.  He  paid  storage  and  warehouse  charges,  834.23. 

19.  He  received  an  allowance  for  damaged  goods  purchased,  82.50. 

21.  He  returned  goods  which  were  found  to  be  unsalable,  823.23. 

25.  He  purchased  merchandise  valued  at  82,000.00. 

27.  He  paid  for  warehouse  supplies,  834.55. 

30.  He  paid  for  warehouse  labor,  865.00. 

30.  He  purchased  merchandise  valued  at  81,067.98. 


Illustration  14 


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Observations:  Bchil  the  Merchandise  Purchases  account  to  show  the  cost  of  the  merchan- 
dise purchased,  and  for  any  additional  cost  to  the  merchandise  purchased. 

Crcdil  the  Merchandise  Purchases  account  to  show  any  decrease  in  the  cost  of  merchandise 
purchased. 

Analysis  of  the  Model  Merchandise  Purchases  Account: 

Septemlx;r  1.     Tlu;  Mertliandise  Purchases  account  is  debited  with  $1,500.00  to  show 
the  cost  of  the  merchandise  purchased. 


MERCHANDISE  ACCOUNTS  33 

September  6.  The  Merchandise  Purchases  account  is  debited  with  $12.34  for  the  freight 
on  goods  bought  since  freight  is  an  additional  cost  of  merchandise 
purchased. 

12.  The  Merchandise  Purchases  account  is  credited  with  $2.36  for  the  short- 
age claim  on  merchandise  bought  since  this  will  decrease  the  cost  of 
merchandise  purchased. 

15.  The  Merchandise  Purchases  account  is  credited  with  $1,34  for  the  rebate 
on  freight  charges  paid  since  this  will  decrease  the  freight  charges  and 
thereby  decrease  the  cost  of  merchandise  purchased. 

17.  The  Merchandise  Purchases  account  is  debited  with  $34.23  for  the  stor- 
age and  warehouse  charges  since  all  expenses  and  charges  on  goods 
bought  is  an  additional  cost  to  merchandise  purchased. 

19.  The  Merchandise  Purchases  account  is  credited  with  $2.50  for  the  allow- 
ance for  damaged  goods  bought  since  this  will  decrease  the  cost  of 
merchandise  purchased. 

21.  The  Merchandise  Purchases  account  is  credited  with  $23.23  for  the  goods 
returned  which  were  found  to  be  unsalable  since  this  will  decrease 
the  cost  of  merchandise  purchased. 

25.  The  Merchandise  Purchases  account  is  debited  with  $2,000.00  to  show  the 
cost  of  merchandise  purchased. 

27.  The  Merchandise  Purchases  account  is  debited  with  $34.55  for  the  ware- 
house supplies  since  all  expenses  on  goods  bought  are  additional  costs 
to  merchandise  purchased. 

30.  The  Merchandise  Purchases  account  is  debited  with  $65.00  for  warehouse 
labor  since  any  expense  necessary  in  preparing  the  goods  for  delivery 
to  the  customer  increases  the  cost  of  merchandise  purchased. 

30.  The  Merchandise  Purchases  account  is  debited  with  $1,067.98  to  show  the 
cost  of  merchandise  pm'chased. 

The  Merchandise  Purchases  account  shows  that  the  total  cost  of  merchandise  purchased 
is  $4,714.10;  the  merchandise  returned,  rebates,  and  allowances  amount  to  $29.43,  therefore 
the  net  cost  is  the  difference  or  $4,684.67. 

The  result  of  a  Merchandise  Purchases  account  shows  the  cost  of  merchandise  purchased. 
This  result  is  found  by  taking  the  difference  between  the  two  sides  of  the  account. 

The  Merchandise  Purchases  account,  at  the  close  of  a  business  period,  is  closed  and  the 
balance  carried  to  the  debit  side  of  the  Merchandise  Trading  account. 

A  business  period  is  the  period  of  time  for  a  smnming  up  of  the  profits  and  losses  of  a 
business.  A  business  period  is  usually  understood  to  mean  a  year,  but  for  practical  reasons  a 
business  period  may  refer  to  a  monthly,  quarterly,  or  semi-annual  division  of  the  year. 

The  Merchandise  or  Merchandise  Trading  account  is  set  up  at  the  close  of  a  business  period 
to  show  the  results  of  the  buying  and  selling  of  merchandise. 

Invoice  and  Bill. — An  invoice  is  an  itemized  account  of  goods  bought,  while  a  bill  is  an 
itemized  account  of  goods  sold,  of  work  performed,  or  expenses  incurred. 
3 


34 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Both  the  invoice  and  the  bill  shoukl  contain  the  place  and  date  of  the  purchase  or  sale, 
the  terms,  the  quantity,  name,  price  and  amount  of  each  item,  and  the  total  amount  of  the 
bill  or  invoice. 

Such  an  itemized  account  as  is  mentioned  above  is  called  by  the  buyer  an  invoice;  and 
by  the  seller,  a  bill.  It  has,  however,  become  quite  customary  for  both  the  buyer  and  the 
seller  to  call  it  an  invoice.  The  tenn  invoice,  however,  is  never  applied  to  a  statement  of 
services  rendered  or  of  expenses  incurred. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then  the 
date.  When  the  examples  are  completed,  hand  your  work  to  yoxir  instructor  for  examination 
and  approval. 

Exercise  21 

Transactions  affecting  the  Merchandise  Purchases  account  in  the  books  of  L.  L.  Tucker. 

October  1.  He  purchased  merchandise  valued  at  81,200.00. 

8.  He  paid  freight  and  drayage  charges  on  merchandise  bought,  S78.34. 

11.  He  paid  storage  and  warehouse  charges,  S24.67. 

14.  He  paid  for  warehouse  supplies,  811.23. 

16.  He  received  a  credit  memorandum  for  shortage  in  goods  bought,  8112.34. 

18.  He  was  allowed  a  rebate  on  an  overcharge  on  freight,  83.47. 

19.  He  purchased  merchandise  valued  at  81,400.00. 

20.  He  paid  freight  charges  on  merchandise  bought,  817.29. 

20.  He  received  a  credit  memorandum  for  damaged  goods  returned,  811.23. 

26.  He  took  merchandise  for  his  own  private  use,  at  cost,  $13.13. 

28.  He  paid  for  warehouse  labor,  855.00. 

29.  He  paid  cartage  charges  on  merchandise  bought,  $16.00. 
31.  He  purchased  merchandise  valued  at  81,079.09. 

Questions:  1.  What  is  the  object  of  keeping  the  Merchandise  Purchases  account?  2. 
When  is  the  ^Merchandise  Purchases  account  debited?  3.  When  is  the  Merchandise  Purchases 
account  credited?  4.  What  is  the  total  cost  of  Merchandise  Purchases?  5.  Analyze  each 
tran.saction  following  the  method  used  in  analyzing  the  model  Merchandise  Purchases 
account. 

Exercise  22 

Transactions  affecting  Merchandise  Purchases  account  in  the  books  of  J.  G.  Moore. 
November  1.     He  purchased  merchandise  valued  at  81,500.00. 

10.  He  paid  freight  on  meichandi.s(>  bought,  856.78. 

11.  He  paid  drayage  on  merchandise  bought,  811.23. 

14.  He  donated  goods  to  the  City  Hospital,  at  cost  price,  823.78. 

17.  He  returned  goods  which  were  of  an  inferior  grade,  876.45. 

21.  He  was  allowed  a  shortage  claim  on  merchandise  bought,  856.34. 

22.  He  purchased  merchandise  valued  at  81,100.00. 

25.  He  paid  for  warehouse  supplies,  845.67. 

26.  He  paid  for  freight  on  meichandise  bought,  $25.11. 

28.  He  paid  express  charges  on  merchandise  purchased,  $11.12. 

29.  He  paid  for  waichouse  labor,  867.00. 

30.  He  lAuchased  merchandise  valued  at  8967.23. 

30.     He  paid  cartage  charges  on  merchandise  bought,  815.00. 

Questions:  1.  Define  invoice-bill.  2.  Define  merchandise.  3.  Name  the  various 
items  which  decrease  the  cost  of  Mercliaiidise  Purchases.     4.  Analyze  each  transaction  follow- 


MERCHANDISE  ACCOUNTS 


35 


ing  the  method  used  in  analyzing  Exorcise  21.      5.  Read  from  your  accounts  the  history  of 
the  transactions,  i.  e.,  state  what  transactions  gave  rise  to  each  ledger  entry. 


THE  FREIGHT  INWARD  ACCOUNT 

Many  bookkeepers  consider  it  a  better  practice  to  keep  a  separate  account,  called  Freight 
Inward,  in  which  to  enter  all  freight,  express  and  draj'-age  charges  in  order  that  each  account 
may  show  but  one  specific  result.  These  items  contribute  to  increasing  the  cost  of  merchandise 
purchased  and  are  often  charged  directly  to  the  Merchandise  Purchases  account.  If  for  any 
reason  a  Freight  Inward  account  is  kept,  the  following  method  is  used. 

Illustration  15 


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.30 


2 
23  d 


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62 


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Observations :  "Dthit  the  Freight  Inward  account  to  show  the  cost  of  all  freight,  express 
and  drayage  charges  on  merchandise  purchased. 

Credit  the  Freight  Inward  account  to  show  the  amount  of  any  rebate  or  allowance  on 
freight,  express  and  drayage  charges  previously  charged  to  this  account. 

The  result  of  the  Freight  Inward  account  shows  the  net  cost  of  the  freight,  express  and 
drayage  charges  on  merchandise  purchased.  The  balance,  at  the  close  of  a  business  period, 
is  usually  carried  to  the  debit  side  of  the  Merchandise  Purchases  account. 

Freight,  express  and  drayage  charges  on  merchandise  sold  is  a  selling  expense  and  not  a 
part  of  the  purchase  price  of  merchandise. 

The  transactions  given  in  these  exercises  involve  the  use  of  accounts  with  Merchandise 
Purchases  and  Freight  Inward.  Enter  the  merchandise  purchased  in  the  Merchandise 
Purchases  account  and  all  freight,  express  and  drayage  charges  on  merchandise  purchased  in 
the  Freight  Inward  account.  Close  the  balance  of  the  Freight  Inward  account  into  the 
Merchandise  Purchases  account. 

Exercise  23 

Transactions  affecting  the  Merchandise  Purchases  and  Freight  Inward  accounts  in  the 
books  of  David  Monroe. 

September  1.     He  purchased  merchandise  valued  at  $1,800.00. 

3.  He  paid  freight  charges,  $21.72. 

4.  He  was  allowed  a  shortage  claim  on  merchandise  bought,  $13.21. 

5.  He  paid  for  warehouse  supplies,  $17.92. 

6.  He  purchased  merchandise  valued  at  $214.18. 
8.     He  paid  freight  charges,  $28.12. 


36  BOOKKEEPING  FOR  MODERN  BUSINESS 

September  10.     He  was  allowed  n  rebate  on  an  overcharge  on  freight,  S5.46. 

11.  Ho  received  an  allowance  for  ilaniaged  goods  purchased,  832.23. 

14.  He  paid  storage  and  warehouse  ciiargcs,  .Si 7.47. 

15.  He  purchased  nu'rchandise  valued  at  .S341.ll. 

16.  He  paid  drayage  charges  on  merchandise  bought,  $11.27. 

17.  He  paid  freight  charges,  S14.51. 

18.  He  paid  warehouse  lai)or,  .S15.00. 

20.  He  returned  goods  which  were  damaged,  .S3 1.28. 

22.  He  purchased  merchandise  valued  at  SI, 643. 37. 

24.  He  paid  freight  charges,  S28.22. 

26.  He  was  allowed  a  rebate  on  an  overcharge  on  freight,  $4.89. 

27.  He  returned  goods  whicii  were  damaged,  $29.27. 

28.  He  purchased  merchandise  valued  at  $211.23. 

29.  He  paid  warehouse  labor,  815.00. 

30.  He  paid  storage  and  warehouse  charges,  $27.11. 

Exercise  24 

Enter  the  transactions  in  Exercise  21,  in  a  Merchandise  Purchases  or  Freight  Inward 
account.  Close  the  balance  of  the  Freight  Inward  account  into  the  Merchandise  Purchases 
account. 

Exercise  25 

Enter  the  transactions  in  Exercise  22,  in  a  Merchandise  Purchases  or  Freight  Inward 
account.  Close  the  balance  of  the  Freight  Inward  account  into  the  Merchandise  Purchases 
account. 

Exercise  26 

Enter  the  transactions  given  in  Illustration  14,  in  a  Merchandise  Purchases  or  Freight 
Inward  account.  Close  the  balance  of  the  Freight  Inward  account  into  the  IMerchandise 
Purchase  account. 

Questions:  1.  What  is  the  object  of  keeping  a  Freight  Inward  account?  2.  When  is  the 
Freight  Inward  account  debited?  When  credited?  3.  What  does  the  result  or  balance  of 
the  Freight  Inward  account  show?  4.  Why  is  the  balance  of  the  Freight  Inward  account 
carried  to  the  Merchandise  Purchases  account?  5.  Read  from  your  account  the  history  of  the 
transactions,  i.  e.,  state  what  transaction  gave  rise  to  each  ledger  entry. 

THE   MERCHANDISE   SALES  ACCOUNT 

The  object  of  keeping  a  Merchandise  Sales  account  is  to  show  the  net  returns  from 
merchandise  sold. 

Illustrative  Exercise 

Transactions  affecting  the  Merchandise  Sales  account  in  the  books  of  R.  D.  Smith. 
September  1.     He  sold  merchandise  amounting  to  $1,200.00. 
6.     He  allowed  a  shortage  claim  of  $12. .34. 

12.  He  allowed  an  overcharge  claim  for  $15.67. 

19.  He  allowed  a  claim  for  damaged  goods.  .S4.56. 

20.  He  sold  merchandise  amounting  to  $1,400.00. 
22.     Cioods  were  returned  amounting  to  $17.37. 

29.  (Joods  were  returned  amounting  to  $23.45. 

30.  He  sold  merchandise  amounting  to  $1,412.76. 


MERCHANDISE  ACCOUNTS 


37 


Illustration  16 


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2Z 
2^ 
JO 


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20 
30 


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Observations:  "Dehii  the  Merchandise  Sales  account  to  show  the  value  of  any  rebate, 
allowance  or  other  deduction  which  diminishes  the  amount  to  be  reaUzed  from  merchandise 

sold. 

Credit  the  Merchandise  Sales  account  to  show  the  selling  price  of  merchandise  sold. 


L, 200.00  to  show  the 


Analysis  of  the  Model  Merchandise  Sales  Account: 

September  1.     The  Merchandise  Sales  account  is  credited  with 

selling  price  of  merchandise  sold. 
6.     The  Merchandise  Sales  account  is  debited  with  $12.34  for  the  shortage 

claim  since  this  will  diminish  the  amount  to  be  realized  on  merchandise 

sold. 
The  Merchandise  Sales  account  is  debited  with  $15.67  for  the  allowance 

for  overcharge   since   this  will  diminish   the  amount  to  be  realized 

on  merchandise  sold. 
The  Merchandise  Sales  account  is  debited  with  $4.56  for  the  claim  for 

damaged  goods  since  this  will  diminish  the  amount  to  be  realized  from 

merchandise  sold. 
The  Merchandise  Sales  account  is  credited  with  $1,400.00  to  show  the 

selling  price  of  merchandise  sold. 
The  Merchandise  Sales  account  is  debited.     Why? 
The  Merchandise  Sales  account  is  debited.     Why? 
The  Merchandise  Sales  account  is  credited  with  1 

selling  price  of  merchandise  sold. 


12. 


19. 


20. 

22. 
29. 
30. 


1,412.76  to  show  the 


The  result  of  this  Merchandise  Sales  account  shows  the  total  sales  were  $4,012.76.  Goods 
returned  and  allowances  amounted  to  $72.39.  The  net  returns  from  sales,  therefore,  is  the 
difference,  $3,939.37. 


38  BOOKKEEPING   FOR   MODERN  BUSINESS 

The  result  of  a  Merchandise  Sales  account  shows  the  net  returns  from  merchandise  sold. 
This  is  found  by  taking  the  difference  between  the  two  sides  of  tlie  account. 

The  ^Merchandise  Sales  account,  at  the  close  of  the  business  period,  is  closed  and  the 
balance  carried  to  the  credit  side  of  the  Merchandise  Trading  account. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then  the 
date.  When  the  examples  are  completed,  hand  your  work  to  your  instructor  for  examination 
and  approval. 

Exercise  27 

Transactions  affecting  the  Merchandise  Sales  account  in  the  books  of  T.  B.  Lee. 

October  1.  He  sold  merchandise  amounting  to  $1,300.00, 

6.  He  allowed  a  claim  for  damaged  goods,  .$23.45. 

12.  Goods  were  returned  amounting  to  SI  1.34. 

18.  He  allowed  a  shortage  claim,  S4.56. 

19.  He  sold  merchandise  amounting  to  $1,500.00. 
24.  Goods  were  returned  amounting  to  $12.67. 
29.  An  overcharge  claim  was  allowed,  $7.68. 

31.     He  sold  merchandise  amounting  to  $1,067.98. 

Questions:  1.  What  is  the  object  of  keeping  the  Merchandise  Sales  account?  2.  When 
is  the  Merchandise  Sales  account  debited?  3.  When  is  the  Merchandise  Sales  account 
credited?  4.  What  were  the  net  returns  from  sales?  5.  Analyze  each  transaction  following 
the  method  used  in  analyzing  the  model  Merchandise  Sales  account. 

Exercise  28 

Transactions  affecting  the  Merchandise  Sales  account  in  the  books  of  W,  D.  Tell, 

November  1.  He  sold  merchandise  amounting  to  $1,200.00. 

9.  Goods  were  returned  amounting  to  $35.67. 

11.  He  allowed  a  claim  for  damaged  goods,  $3.45. 

17.  An  overcharge  claim  was  allowed,  $23.78. 

19.  He  sold  merchandise  amounting  to  $2,000.00. 

23.  Goods  were  returned  amounting  to  $12.34, 

27.  He  allowed  a  shortage  claim  of  $45.34. 

30.  He  sold  merchandise  amounting  to  $1,035.67, 

Questions:  1.  What  was  the  total  amount  of  merchandise  sold?  Explain.  2.  How  is 
the  net  returns  from  the  sales  found?  Explain.  3.  Analyze  each  transaction  following  the 
method  used  in  analyzing  E.xercise  27.  4.  Read  from  your  accounts  the  history  of  the  trans- 
actions, i.  e.,  state  what  transaction  gave  rise  to  each  ledger  entry. 

Merchandise  Inventory 

A  Merchandise  Inventory  is  an  itemized  list  sli owing  the  value  of  the  unsold  merchandise 
on  hand  at  the  close  of  a  business  period,  calculated  usually  at  cost  price. 

Illustrative  Exercise 

R,  D.  Smith,  a  merchant,  by  making  an  actual   count  of  all  the  unsold  merchandise  on 
hand  September  30,  19 — ,  found  he  had  the  following  merchandise: 
25   bbl.  Flour     pmcliased  at  Sl()..')()  per  blij. 


MERCHANDISE  ACCOUNTS 


39 


niustratioa  17 


148  bu.  Wheat  purchased  at  $1.75  per  bu. 

239  bu.   Oats     purchased  at  .75  per  bu. 

259  bu.   Corn     purchased  at  SI. 50  per  bu. 

129  bu.   Rye      purchased  at  $1.25  per  bu. 


yO^Z^^l'CJz-C^.^'T^Z't^^Cc^^ 


■Jc^  y^  - 


/2^     ^. 


2  ^2 

2^£^ 


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CC 


25 


sd 


z    s   o 


so 


THE  MERCHANDISE  INVENTORY  ACCOUNTj 

The  ohjed  of  keeping  a  Merchandise  Inventory  account  is  to  show  the  value  of  the  unsold 
merchandise  on  hand  at  the  close  of  any  business  period. 

Illustrative  Exercise 

The  following  are  the  monthly  inventories  as  shown  by  the  Merchandise  Inventory 
account  in  the  books  of  Henry  Bruce. 

July  31,  19—,  $2,345.67;  August  31,  $2,645.78;  September  30,  $2,476.98. 


Illustration  18 


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3'6 


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Observations :  Dehit  the  Merchandise  Inventory  account  to  show  the  value  of  the  unsold 
merchandise  on  hand  at  the  close  of  a  business  period. 

Credit  the  Merchandise  Inventory  account  for  the  value  of  the  unsold  merchandise  which 
was  debited  at  the  close  of  the  previous  business  period. 


40  BOOKKEEPING  FOR  MODERN  BUSINESS 

Analysis  of  the  Model  Merchandise  Inventory  Account: 

July  31.  The  ^lerchandise  Inventory  account  is  debited  with  $2,345.67  to  show 

the  value  of  the  unsold  merchandise  on  hand  at  the  close  of  the  business 

period,  July  31st. 
August  31.  The  ]\Ierchandise  Inventory  account  is  credited  with  $2,345.07  at  the 

close  of  the  business  period,  August  31st,  for  the  value  of  the  unsold 

merchandise  which  was  debited  at  the  close  of  the  previous  business 

period,  July  31st. 
31.  The  Merchandise  Inventory  account  is  debited  with  $2,645.78  to  show 

the  value  of  the  unsold  merchandise  on  hand  at  the  close  of  the  business 

period,  August  31st. 
September  30.     The  Merchandise  Inventory  account  is  credited  with  $2,645.78  at  the 

close  of  the  lousiness  period,  September  30th,  for  the  value  of  the  unsold 

merchandise  which  was  debited  at  the  close  of  the  previous  business 

period,  August  31st. 
30.     The  Merchandise  Inventory  account  is  debited  with  $2,476.98  to  show 

the  value  of  the  unsold  merchandise  on  hand  at  the  close  of  the  business 

period,  September  30th, 

The  result  of  this  Merchandise  Inventory  account  shows  the  cost  of  the  unsold  merchan- 
dise on  hand  September  30th,  $2,470.98. 

The  result  of  a  Merchandise  Inventor}^  account  shows  the  cost  of  the  unsold  merchandise 
on  hand. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then 
the  date.  When  the  examples  are  completed,  hand  your  work  to  your  instructor  for 
examination  and  approval. 

Exercise  29 

The  following  are  the  quarterly  inventories  as  shown  by  the  Merchandise  Inventory 

account  in  the  books  of  Brown  &  White. 

December  31,  19—,  $3,476.78;  March  31,  19—,  $3,657.89;  June  30,  19—,  $3,576.09; 
September  30,  19—,  $3,487.68;  December  31,  19—,  $3,738.28. 

Questions:  1.  How  is  the  Merchandise  Inventory  usually  taken?  2.  What  is  a  business 
or  fiscal  period?  3.  What  is  the  object  of  keeping  a  Merchandise  Inventory  account?  4. 
Analyze  each  record  following  the  method  used  in  analyzing  tiie  model  Merchandise 
Inventory  account. 

Exercise  30 

The  following  are  the  semi-annual  inventories  as  shown  by  the  Merchandise  Inventory 
account  in  the  books  of  R.  S.  Bright. 

December  31,  19—,  $3,267.92;   June  30,  19—,  $3,687.63;  December  31,  19—,  $3,355.67. 

Questions:  1.  How  often  is  the  Merchandise  Inventory  taken?  2.  When  do  you  debit 
the  Merclianchse  Inventory  account?  3.  When  do  you  credit  the  Merchandise  Inventory 
account?     4.  Analyze  each  record  following  the  method  used  in  analyzing  Exercise  29. 


MERCHANDISE  ACCOUNTS  41 

The  transactions  given  in  these  exercises  involve  the  use  of  accounts  with  Merchandise 
Purchases,  Merchandise  Sales,  Freight  Inward  and  Merchandise  Inventory.  Enter  each 
transaction  in  the  proper  ledger  account.  Close  the  balance  of  the  Freight  Inward  account 
into  the  Merchandise  Purchases  account,  pencil-foot  and  rule  the  Merchandise  Purchases 
and  Merchandise  Sales  accounts.  Keep  the  work,  after  it  has  been  approved  by  your 
instructor,  for  a  subsequent  exercise. 

Exercise  31   (Review) 

Transactions  affecting  the  Merchandise  Purchases,  Merchandise  Sales,  Freight  Inward, 
and  Merchandise  Inventory  accounts  in  the  books  of  S.  H.  Rickard. 
September  1.     He  purchased  merchandise  valued  at  $2,768.11. 

2.  He  paid  freight  charges,  S37.ll. 

3.  He  sold  merchandise  amounting  to  $617.22. 

4.  He  was  allowed  a  shortage  claim  on  merchandise  bought,  $62.32. 

5.  He  allowed  an  overcharge  claim  on  goods  sold  on  the  3d,  $15.67. 

6.  He  purchased  merchandise  valued  at  $3,326.27. 

8.  He  paid  cartage  charges  on  merchandise  purchased  on  the  6th,  $31.28. 

9.  He  sold  merchandise  amounting  to  $1,231.22. 

10.  He  received  an  allowance  for  damaged  goods  purchased,  $11.29. 

12.  He  paid  storage  and  warehouse  charges,  $16.23. 

13.  He  was  allowed  a  rebate  on  an  overcharge  on  freight,  $3.27. 
15.  He  purchased  merchandise  valued  at  $611.00. 

17.  He  sold  merchandise  amounting  to  $1^821.42. 

18.  Merchandise  sold  yesterday  was  returned  to  him  valued  at  $22.77. 

19.  He  returned  merchandise  purchased  on  the  15th  amounting  to  $27.42. 

20.  He  paid  warehouse  labor,  $15.00. 

22.  He  allowed  a  claim  for  damaged  goods  sold  on  the  17th    amounting  to 

$13.98. 

23.  He  sold  merchandise  amounting  to  $719.87. 

24.  He  purchased  merchandise  valued  at  $1,121.91. 

25.  He  paid  cartage  charges,  $31.22. 

26.  He  sold  merchandise  amounting  to  $1,211.21. 

27.  He  returned  goods  purchased  on  the  24th  which  were  damaged,  $47.21. 

29.  He  was  allowed  a  rebate  on  the  cartage  charges  of  the  25th,  $5.68. 

30.  He  sold  merchandise  amounting  to  $1,126.47. 

30.  S.  H.  Rickard,  by  making  an  actual  count  of  all  the  unsold  merchandise 
on  hand,  found  he  had  merchandise,  valued  at  cost,  amounting  to 
$1,927.46. 

Exercise  32  (Review) 

Transactions  affecting  the  Merchandise  Purchases,  Merchandise  Sales,  Freight  Inward, 
and  Merchandise  Inventory  accounts  in  the  books  of  James  Ennis. 

October  1.  He  purchased  merchandise  valued  at  $1,918.17. 

2.  He  paid  freight  and  cartage  charges,  $21.27. 

3.  He  sold  merchandise  amounting  to  $624.17. 

4.  He  returned  merchandise  purchased  on  the  1st  amounting  to  $56.11. 

5.  He  was  allowed  a  rebate  on  an  overcharge  of  freight,  $4.68. 

6.  He  purchased  merchandise  valued  at  $2,417.72. 

8.  He  paid  freight  charges,  $24.96. 

9.  He  returned  merchandise  purchased  on  the  6th  amounting  to  $11.72. 

10.  He  paid  storage  and  warehouse  charges,  $22.68. 

11.  He  allowed  a  claim  for  damaged  goods  sold  on  the  3d,  $23.11. 


42 


BOOKKEEPING   FOR   MODERN  BUSINESS 


October  12.  He  sold  merchandise  fimountinff  to  81,672.11. 

13.  He  paid  warehouse  labor,  §15.00. 

15.  He  received  an  allowance  for  damaged  goods  purchased  on  the  6th,  $27.98. 

16.  He  purchased  merchandise  valued  at  $1,817.28. 

17.  He  paid  freight  charges,  S18.ll. 

18.  He  sold  merchandise  amounting  to  $2,148.41. 

19.  He  received  a  rebate  on  the  freight  charges  of  the  17th,  $2.98. 

20.  Merchandise  sold  on  the  18th  was  returned  to  him  valued  at  $11.42. 

22.  He  returned  merchandise  purchased  on  the  Kjth  which  was  damaged,  $33.84. 

23.  He  sold  merchandise  amounting  to  $1,511.21. 

24.  He  paid  for  warehouse  labor,  $15.00. 

25.  He  allowed  an  overcharge  claim  on  the  merchandise  sold  on  the  23d,  $27.41. 

26.  He  received  an  allowance  for  damaged  goods  purchased  on  the  16th,  $4.27. 

27.  He  sold  merchandise  amounting  to  $310.17. 

29.  He  purchased  merchandise  valued  at  $425.00. 

30.  He  paid  freight  antl  cartage  charges,  $9.78. 

30.  He  paid  storage  and  warehouse  charges,  $21.11. 

31.  James  Ennis,  by  making  an  actual  count  of  all  unsold  merchandise  on  hand, 

found  he  had  merchandise,  valued  at  cost,  amounting  to  $2,411.98. 

THE  MERCHANDISE  TRADING  ACCOUNT 

The  Merchandise  Trading  or  Merchandise  Summary  account  is  set  up  at  the  close  of  a 
business  period  to  show  the  results  of  the  buying  and  selling  of  merchandise. 

Those  accounts  in  which  are  recorded  the  various  items  entering  into  the  cost  of  goods 
purchased  and  those  affecting  the  returns  from  goods  sold  are  closed,  and  the  balances  carried 
to  the  IMerchandisc  Trading  or  Merchandise  Summary  account. 

The  cost  of  goods  sold  is  the  result  obtained  by  deducting  the  value  of  the  merchandise 
inventorj^  from  the  cost  of  merchandise  purchased. 

The  gross  profit  on  sales  is  the  result  obtained  by  deducting  the  cost  of  goods  sold  from  the 
net  returns  from  sales. 

The  object  of  keeping  a  Merchandise  Trading  account  is  to  show  the  results  of  the  buying 

and  selling  of  merchandise. 

Illustrative  Exercise 

The  cost  of  goods  purchased,  as  shown  by  the  model  ^Merchandise  Purchases  account  of 
R.  D.  Smith  (see  Illustration  14),  is  $4,684.67;  the  net  returns  from  sales,  as  shown  l)y  the 
model  Merchandise  Sales  account  (see  Illustration  16),  is  $3,939.37.  The  unsold  merchandise 
on  hand,  as  shown  by  the  Merchandise  Inventory  (see  Illustration  17),  cost  $1,250.50.  What 
is  the  gross  profit  or  loss  as  shown  by  the  results  of  the  buying  and  selling  of  merchandise? 

Illustration  19 


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so 


MERCHANDISE  ACCOUNTS  43 

Observations :  Debit  the  Merchandise  Trading  account  for  the  cost  of  the  merchandise 
purchased  as  shown  by  the  balance  of  the  Merchandise  Purchases  account. 

Credit  the  Merchandise  Trading  account  for  the  net  returns  from  sales  as  shown  by  the 
balance  of  the  Merchandise  Sales  account. 

Credit  the  Merchandise  Trading  account  for  the  cost  value  of  the  merchandise  on  hand  as 
shown  by  the  Merchandise  Inventory. 

Analysis  of  the  Merchandise  Trading  Account: 

September  30.  The  Merchandise  Trading  account  is  debited  with  $4,684.67,  the  cost 
of  the  merchandise  purchased  as  shown  by  the  balance  of  the 
Merchandise  Purchases  account. 
30.  The  Merchandise  Trading  account  is  credited  with  $3,939.37,  net  returns 
from  sales  as  shown  by  the  balance  of  the  Merchandise  Sales  account. 
30.  The  Merchandise  Trading  account  is  credited  with  $1,250.50,  the  cost 
value  of  the  unsold  merchandise  on  hand. 

Instead  of  subtracting  the  Merchandise  Inventory  from  the  debit  side  of  the  Merchandise 
Trading  account  in  order  to  find  the  cost  of  goods  sold,  it  is  added  to  the  credit  side.  This 
accomplishes  the  same  result.     It  is  not  proper  to  show  a  subtraction  in  a  ledger  account. 

The  result  of  a  Merchandise  Trading  account  shows  the  gross  trading  profit  or  loss  from 
the  buying  and  selling  of  merchandise. 

The  Merchandise  Trading  account,  at  the  close  of  the  business  period,  is  closed  showing 
the  gross  profit  or  loss  from  sales.  If  there  is  a  profit,  the  balance  is  carried  to  the  credit  side 
of  the  Profit  and  Loss  account;  if  a  loss,  to  the  debit  side  of  the  Profit  and  Loss  account. 

Exercises  for  the  Student 
Prepare  the  ledger  accounts  for  the  following  examples.     Enter  the  amount  first,  then  the 
date.     When  the  examples  are  completed,  hand  your  work  to  your  instructor  for  examination 

and  approval. 

Exercise  33 

December  31,  19—.  The  cost  of  goods  purchased,  as  shown  by  the  Merchandise  Pur- 
chases account  of  T.  B.  Lee,  is  $5,567.89;  the  net  returns  from  sales,  as  shown  by  the  IVIer- 
chandise  Sales  account,  is  $5,023.45.  The  unsold  merchandise  on  hand,  as  shown  by  the 
Merchandise  Inventory,  is  $1,516.71.  What  is  the  gross  profit  or  loss  as  shown  by  the 
results  of  these  accounts? 

Questions:  1.  What  is  the  object  of  keeping  a  Merchandise  Trading  account?  2.  What 
is  meant  by  the  gross  trading  profit?  3.  What  is  meant  by  the  cost  of  goods  sold?  4.  What 
method  is  used  by  the  bookkeeper  to  show  a  subtraction  in  a  ledger  account? 

Exercise  34 

June  30,  19—.  The  cost  of  goods  purchased  is  $4,465.65;  the  net  returns  from  sales  is 
$4,123.23.  The  merchandise  inventory  is  $1,811.21.  What  is  the  gross  profit  or  loss  as  shown 
by  these  accounts? 

Questions:  1.  What  is  meant  by  a  business  or  fiscal  period?  2.  What  does  the  result 
of  the  Merchandise  Trading  account  show?     3.  When  is  the  Merchandise  Trading  account 


44  BOOKKEEPING  FOR   MODERN  BUSINESS 

debited?    When  credited?    4.  Analyze  each  record  following  the  method  used  in  analyzing 
the  model  Merchandise  Trading  account. 

Exercise  35 

Prepare  a  Merchandise  Trading  account  for  Exercise  31. 

Exercise  36 

Prepare  a  ^Merchandise  Trading  account  for  Exercise  32. 

Exercise  37 

The  rate  of  gross  profit  on  sales. 

1.  If  the  sales  is  used  as  the  basis  for  determining  the  rate  of  profit,  divide  the  gross  profit 
on  sales  by  the  net  return  from  sales. 

2.  If  the  cost  of  sales  is  used  as  the  basis  for  determining  the  rate  of  profit,  divide  the 
gross  profit  on  sales  by  the  cost  of  goods  sold.  The  cost  of  sales  is  found  by  subtracting  the 
merchandise  inventory  from  the  cost  of  merchandise  purchased. 

(a)  E.xercise  33.  What  is  the  rate  of  profit  on  sales;  on  the  cost  of  sales?  The  result  in 
per  cent  should  be  carried  to  three  decimal  places. 

(b)  Exercise  34.     What  is  the  rate  of  profit  on  sales;  on  the  cost  of  sales? 

(c)  Exercise  35.     What  is  the  rate  of  profit  on  sales;  on  the  cost  of  sales? 

(d)  Exercise  36.     What  is  the  rate  of  profit  on  sales;  on  the  cost  of  sales? 

Exercise  38  (Review) 

Determine  the  gross  trading  profit  or  loss  from  the  results  of  the  following  merchandise 

accounts: 

McTf'handise 
Purchases 

(1) S1,000.00 

(2) 2,000.00 

(3) 1,500.00 

(4) 750.00 

(5) 800.00 

(6) 650.00 

(7) 960.00 

EXPENSE   ACCOUNTS 

In  conducting  a  business  there  will  be  various  outlays  of  cash  or  its  equivalent  necessary 
to  procure  things  consumed  in  conducting  the  business.  Thus,  the  cost  of  rent,  heat,  light, 
stationery,  office  books,  salaries,  etc.,  may  be  grouped  under  an  account  called  Expense. 

An  Expense  is  any  cost  necessary  to  carry  on  the  business. 

Separate  accounts  may  be  kept  with  Rent,  Salarii's,  Insurance,  Advertising,  Postage, 
Heat,  Power,  or  any  other  class  of  expense  for  which  a  separate  record  is  desired.  While  this 
may  be  advisable  for  large  business  houses  in  order  that  a  careful  analysis  of  the  business  may 
be  made,  a  more  general  classification  may  be  made  for  the  smaller  business,  as  Selling 
Ivxpen.se  and  General  Expense.  More  detailed  classification  will  be  left  until  the  advanced 
work  is  reached. 


Merchandise 
Sales 

Merchandise 
Inventory 

S800.00 

S400.00 

1,000.00 

900.00 

800.00 

950.00 

350.00 

400.00 

800.00 

800.00 

760.00 

EXPENSE  ACCOUNTS 


45 


THE  SELLING  EXPENSE  ACCOUNT 

The  object  of  keeping  a  Selling  Expense  account  is  to  show  the  net  cost  of  conducting  the 

sales  department. 

Illustrative  Exercise 

Transactions  affecting  the  Selling  Expense  account  in  the  books  of  R.  D.  Smith. 
September  1.     Postage  for  mailing  advertising  matter,  $18.50. 
9.     Wages  of  driver  for  delivering  goods,  $15.00. 

Freight  on  merchandise  sold,  $6.75. 

Feed  for  horses,  $12.50. 

Repairs  on  delivery  wagon,  $9.25. 

Printing  order  books,  $12.45. 

Rebate  on  printing  order  books,  $2.30. 

Salesman's  salary,  $90.00. 

Salesman's  expenses,  $15.60. 


Illustration  20 


15. 
16. 
21. 
26. 
27. 
30. 
30. 


p=^ 


Observations:  Debit  the  Selling  Expense  account  for  the  cost  of  all  expenses  incurred 
directly  in  the  sale  of  merchandise. 

Credit  the  Selling  Expense  account  for  any  returns  from  items  which  were  charged  or 
debited  previously  to  this  account. 

Analysis  of  the  Model  Selling  Expense  Account: 

September  1.  The  Selling  Expense  account  is  debited  with  $18.50  for  the  postage  for 
maihng  advertising  matter  since  it  is  a  cost  in  conducting  the  sales 
department. 
9.  The  Selling  Expense  account  is  debited  with  $15.00  for  the  driver's  wages 
since  delivery  of  merchandise  is  a  cost  in  conducting  the  sales  depart- 
ment. 


46  BOOKKEEPING  FOR  MODERN  BUSINESS 

September  15.     The  Selling  Expense  account  is  debited  with  S6.75  for  the  freight  charges 

since  freight  on  merchandise  sold  is  a  selling  expense. 
10.     The  Selling  Expense  account  is  debited  with  $12.50  for  the  feed  for  the 

horses  since  all  delivery  expenses  are  costs  in  conducting  the  sales 

department. 
21.     The  Sclhng  Expense  account  is  debited  with  $9.25  for  the  repairs  to  the 

delivery  wagon  since  all  delivery  expenses  are  costs  in  conducting  the 

sales  department. 

26.  The  Selling  Expense  account  is  debited  with  $12.45  for  the  printing  of  the 

order  books,  in  which  the  salesman  records  his  orders,  since  all  sales- 
men's expenses  are  costs  in  conducting  the  sales  department. 

27.  The  Selling  Expense  account  is  credited  with  $2. .30  for  the  rebate  on  print- 

ing the  order  books   since  the  account  is  credited  for  any  rebate  or 
return  from  items  previously  debited  to  this  account. 
30.     The  SeUing  Expense  account  is  debited  with  $90.00  and  $15.00  salesman's 
salary  and  expenses   since   these  are  costs  in  conducting  the  sales 
department. 

The  result  of  the  Selhng  Expense  account,  at  the  close  of  the  month,  shows  a  total  selling 
expense  of  $180.05,  and  a  rebate  of  $2.30.  The  difference,  $177.75,  shows  the  net  cost  of 
making  sales. 

The  result  of  a  Selhng  Expense  account  shows  the  net  cost  of  making  sales  for  the  business 
period.     This  is  found  by  taking  the  difference  between  the  two  sides  of  the  account. 

The  Selling  Expense  account,  at  the  close  of  a  business  period,  is  closed  and  the  balance 
carried  to  the  debit  side  of  the  Profit  and  Loss  account. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then  the 
date.  When  the  examples  are  completed,  hand  your  work  to  your  instructor  for  examination 
and  approval. 

Exercise  39 

Transactions  affecting  the  Selling  Expense  account  in  the  books  of  Robert  Lee. 

October  1.  Wrapping  paper  and  twine,  $15.00. 

6.  Horse-shoeing,  $5.25. 

9.  Wages  of  driver  delivering  merchandise,  $10.50. 

14.  Advertising  circulars,  $25.78. 

19.  Newspaper  advertising,  $50.78. 

21.     Freight  on  merchandise  sold,  $5.01. 
24.     Printing  order  book,  $23.45. 

20.  Commission  allowed  to  agent,  $45.67. 

28.     Rebate  on  wrapping  paper  and  twine,  $1.60. 
30.     Salesman's  salary  and  expenses,  $114.36. 

Questions:  1.  Define  Expense.  2.  Name  the  two  Expense  accounts.  3.  What  is  the 
object  of  keeping  the  Selling  Expense  account?  4.  When  is  the  Selling  Expense  account 
debited?  When  credited?  5.  Analyze  each  record  following  the  method  used  in  analyzing 
the  model  Selling  Expense  account. 


EXPENSE  ACCOUNTS 


47 


Exercise  40 

Transactions  affecting  the  Selling  Expense  account  in  the  books  of  Thomas  Wilson. 

November  1.  Horse  feed  for  the  delivery  team,  $35. G7. 

4.  Postage  for  mailing  advertising  circulars,  $23.45. 

7.  Advertising  circulars,  $45.67. 

14.  Freight  paid  on  goods  shipped  to  an  out-of-town  customer,  $11.34. 

16.  Wrapping  paper  and  twine,  $12.70. 

18.  Commission  allowed  to  agent,  $35.67. 

21.  Freight  on  merchandise  sold,  $7.42. 

23.  Wages  of  driver  for  delivering  goods,  .$68.00. 

29.  Rebate  on  freight  paid  on  the  14th,  $2.11. 

30.  Salesman's  salary  and  expenses,  $113.21. 

Questions:  1.  How  much  was  paid  out  for  selHng  expenses?  2.  What  was  the  amount 
of  returns  in  the  SelHng  Expense  account?  3.  What  was  the  net  cost  of  the  selling 
expenses  for  November?  4.  Analyze  each  record  following  the  method  used  in  analyzing 
Exercise  39. 

THE  GENERAL  EXPENSE  ACCOUNT 

The  object  of  keeping  a  General  Expense  account  is  to  show  the  cost  of  the  different  expense 
items  incurred  in  the  general  supervision  and  management  of  the  business. 

Illustrative  Exercise 

Transactions  affecting  the  General  Expense  account  in  the  books  of  R.  D.  Smith. 

September  1.     Coal  for  heating  the  storeroom,  $18.25. 

2.  Rent  for  the  month,  $65.00. 

3.  Taxes,  $23.45. 

16.     Insurance  premium,  $23.32. 

24.  Gas  bill,  $11.25. 

26.     Rebate  on  gas  bill,  $1.25. 
30.     Office  wages,  $75.00. 

Illustration  21 


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J 

30 


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23 
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2JA 


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OO 

32 

cm. 

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2C 
30 


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2/5  02 


Z/d 


Z^ 


48  BOOKKEEPING  FOR   MODERN  BUSINESS 

Observations :  Debit  the  General  Expense  account  to  show  the  cost  of  all  expenses  incurred 
in  the  general  supervision  and  management  of  the  business. 

Credit  the  General  Expense  account  for  any  returns  from  items  which  were  charged  or 
debited  previously  to  this  account. 

Analysis  of  the  Model  General  Expense  Account: 

September  1.  The  General  Expense  account  is  debited  with  $18.25  for  the  coal  for 
heating  the  storeroom  since  this  is  a  general  expense  item  incurred  in 
the  general  management  of  the  business. 

2.  The  General  Expense  account  is  debited  with  S65.00  for  the  rent  since 

this  is  an  expense  item  incurred  in  the  general  management  of  the 
busmess. 

3.  The  General  Expense  account  is  debited  with  $23.45  for  the  taxes  since 

this  is  an  expense  item  incurred  in  the  general  management  of  the 
business. 
IG.     The  General  Expense  account  is  debited  with  $23.32  for  the  insurance 
premium  since  this  is  an  expense  item  incurred  in  the  general  manage- 
ment of  the  business. 
24.     The  General  Expense  account  is  debited  with  $11.25  for  the  amount  of 
the  gas  bill  since  this  is  an  expense  incurred  in  the  general  management 
of  the  business. 
26.     The  General  Expense  account  is  credited  with  $1.25  for  the  rebate  on  the 
gas  bill  since  this  account  is  credited  for  any  rebate  or  return  from 
items  previously  debited  to  this  account. 
30.     The  General  Expense  account  is  debited  with  $75.00  for  the  office  wages 
since  this  is  an  expense  item  incurred  in  the  general  management  of  the 
business. 
The  result  of  this  General  Expense  account,  at  the  close  of  the  month,  shows  the  total 
cost  incurred  in  the  general  supervision  and  management  of  the  business  to  be  $216.27,  and  a 
relmte  of  SI. 25,  the  net  cost  being  the  difference  or  $215.02. 

The  result  of  a  General  Expense  account  shows  the  net  cost  incurred  in  the  general  super- 
vision and  management  of  the  business. 

The  General  Expense  account,  at  the  close  of  a  business  period,  is  closed  and  the  balance 
carried  to  the  debit  side  of  the  Profit  and  Loss  account. 

Exercises  for  the  Student 
Prepare  the  ledger  accounts  for  the  following  examples.     Enter  the  amount  first,  then  the 
date.     When  the  examples  arc  completed,  hand  your  work  to  your  instructor  for  examination 
and  approval. 

Exercise  41 

Transactions  affecting  the  General  Expense  account  of  WiUiam  Webster. 
October   1.     Rent  for  t  lie  month,  $75.00. 

7.     Bill  for  general  office  supplies,  $35.46. 


EXPENSE  ACCOUNTS  49 

October  11.  Office  Wcigcs,  $150.00. 

18.  Gas  bill,  $12..56. 

21.  Rebate  on  gas  bill,  $1.56. 

24.  City  directory,  $5.50. 

27.  Telephone  bill,  $11.35. 

30.  Water  rent,  $4.50. 

Questions:  1.  What  is  the  object  of  keeping  the  General  Expense  account?  2.  When  is 
the  General  Expense  account  debited?  When  credited?  8.  Name  the  two  Expense  accounts. 
4.  Analyze  each  record  following  the  method  used  in  analyzing  the  model  General  Expense 
account. 

Exercise  42 

Transactions  affecting  the  General  Expense  account  of  Walter  Roberts. 

November  1.  Bill  for  general  office  supphes,  $27.68. 

2.  Rent  for  the  month,  $75.00. 

12.  Office  wages,  $150.00. 

16.  Coal  bill,  $24.50;  gas  bill,  $13.47. 

17.  Overcharge  on  coal  bill,  $3.75. 
21.  Meals  for  employees,  $7.50. 
27.  Office  wages,  $150.00. 

30.     General  manager's  salary,  $150.00. 

Questions:  1.  How  much  was  paid  out  for  general  expenses?  2.  What  was  the  amount 
of  returns  m  the  General  Expense  account?  3.  What  is  the  proper  method  of  showing  a 
subtraction  in  a  ledger  account?  4.  What  was  the  net  cost  of  the  general  expenses  for 
November?     5.  Analyze  each  record  following  the  method  used  in  analyzing  Exercise  41. 

The  transactions  given  in  the  two  following  exercises  involve  the  use  of  accounts  with 

Selling  Expense  and  General  Expense.     Enter  each  transaction  in  the  proper  ledger  account. 

Hand  your  work  to  your  instructor  for  examination  and  approval. 

Exercise  43  (Review) 
Transactions  affecting  the  Selling  Expense  and  General  Expense  accounts  in  the  books 
of  J.  Russell  Smith. 

December  1.     Rent  for  the  month,  $100.00. 

2.     Wrapping  paper  and  twine,  $21.75. 
4.     Newspaper  advertising,  .$25.11. 
6.     Coal  bill,  $27.56;  gas  bill,  $15.26. 
9.     Freight  on  merchandise  sold,  $9.84. 
11.     Commission  allowed  to  selhng  agent,  $68.22. 
14.     Overcharge  on  coal  bill,  $1.76. 
16.     Printing  order  books,  $35.82. 
19.     Horse-shoeing,  $8.50. 
21.     Salesman's  expenses,  $75.42. 
25.     Rebate  on  wrapping  paper,  $2.11. 
27.     Meals  for  employees,  .$7.90. 

30.  General  manager's  salary,  $200.00;  office  wages,  $150.00. 

31.  Salesman's  salary,  $175.00. 

Exercise  44  (Review) 
Transactions  affecting  the  Selling  Expense  and  General  Expense  accounts  in  the  books 
of  William  L.  King. 


50 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Januarj'  1.  Rent  for  the  month,  S125.00. 

2.  Legal  expenses,  SGO.OO. 

3.  Telegrams,  $7.40;  telephone  charges,  $17.21. 

4.  Postage,  SIO.OO. 

5.  Advertising  circulars,  S2G.71. 

6.  Wrapping  paper,  S37.76;     office  wages,  S75.00. 
9.  Freight  on  merchandise  sold,  $11.67. 

10.  Newspaper  advertising,  $75.00. 

12.  Rebate  on  freight  charges,  $2.71. 

13.  Wages  of  the  driver  of  delivery  wagon,  $36.00. 
15.  Meals  for  emplovees,  $11.50. 

19.  Horse  feed  for  the  delivery  team,  $27.17. 

23.  Coal  bill,  $56.72;  gas  bill,  $7.40. 

26.  (ienci-al  office  supplies,  $35.22. 

28.  Insurance  on  building,  $32.92. 

•    30.  Salesman's  salary,  $200.00;  salesman's  expenses,  $54.32. 

31.  Water  rent,  $17.35;  office  wages,  $80.00. 


THE   PROFIT   AND   LOSS   ACCOUNT 

The  Profit  and  Loss  account  contains  a  record  of  the  separate  profits  and  losses  of  the 
various  accounts  at  the  close  of  a  business  period,  as  well  as  any  extraordinary  or  unexpected 
profit  or  loss  not  classified  in  any  special  account. 

Illustrative  Exercise 

September  30.     The  Merchandise  Trading  account  shows  a  profit  for  the   month  of 

$505.20.     Illustration  19. 
30.     The  Selling  Expense  account  shows  a  loss  for  the  month   of  $177.75. 

Illustration  20. 
30.     The  General  Expense  account  shows  a  loss  for  the  month  of  8215.02. 

Illustration  21. 
30.     During  the  month,  the  cashier,  in  making  change,  was  short  in  her  cash 

as  shown  by  the  cash  register,  $3.25. 

Illustration  22 


'^.cJc^^^^^^i^ 


jj-^;^} 


30 
30 
3o 
Jo 


^77 

3 


'05 


7^ 

02 
2 

20 


^%' 


JO 


/^^sZ^^^i^L?.;?^ 


^os  2  a 


so^ 


20 


Observations:  Dehii  the  Profit  and  Loss  account  to  show   the   separate  losses  of  the 
various  accounts  at  the  close  of  the  business  period. 


THE  PROFIT  AND  LOSS  ACCOUNT  51 

Credit  the  Profit  and  Loss  account  to  show  the  separate  profits  of  the  various  accounts 
at  the  close  of  the  business  period. 

Analysis  of  the  Model  Profit  and  Loss  Account: 

September  30.     The  Profit  and  Loss  account  is  credited  with  $505.20  to  show  the  amount 

of  the  gross  trading  profit  made  during  the  month  by  the  buying  and 

selling  of  merchandise. 
30.     The  Profit  and  Loss  account  is  debited  with  $177.75  to  show  the  net 

amount  of  loss  incurred  in  conducting  the  sales  department. 
30.     The  Profit  and  Loss  account  is  debited  with  $215.02  to  show  the  net 

amount  of  loss  incurred  in  the  general  supervision  and  management 

of  the  business. 
30.     The  Profit  and  Loss  account  is  debited  with  $3.25  to  show  the  amount 

which  the  cashier  lost  in  making  change  during  the  month. 

The  result  of  the  Profit  and  Loss  account  shows  from  its  debit  side,  losses  amounting  to 
$396.02,  and  from  its  credit  side,  profits  amounting  to  $505.20.  The  difference,  $109.18, 
shows  the  net  profit  of  the  business  for  the  business  period. 

The  result  of  a  Profit  and  Loss  account  shows  the  net  profit  or  loss  for  the  business  period. 
It  is  found  by  taking  the  difference  between  the  two  sides  of  the  account.  If  the  credit  side 
is  the  larger,  it  shows  a  net  profit;  if  the  debit  side  is  the  larger,  it  shows  a  net  loss. 

The  Profit  and  Loss  account,  at  the  close  of  a  business  period,  is  closed  showing  the  net 
profit  or  loss  of  the  business.  If  there  is  a  profit,  the  balance  is  carried  to  the  credit  side 
of  the  proprietor's  account;   if  a  loss,  to  the  debit  side  of  the  proprietor's  account. 

Exercise  45 

The  Profit  and  Loss  account  of  Thomas  Bm-ns. 

October  31.     The   Merchandise   Trading   account   shows  a   profit  for    the    month   of 
81,123.45. 
31.     The  SelUng  Expense  account  shows  a  loss  for  the  month  of  $324.56. 
31.     The  General  Expense  account  shows  a  loss  for  the  month  of  $298.34. 
31.     During  the  month,  the  cashier,  in  making  change,  was  over  in  her  cash  as 
shown  by  the  cash  register,  $5.67. 

Questions:  1.  What  records  are  made  in  the  Profit  and  Loss  account?  2.  When  is  the 
Profit  and  Loss  account  debited?  When  credited?  3.  Analyze  each  record  following  the 
method  used  in  analyzing  the  model  Profit  and  Loss  account. 

Exercise  46 

The  Profit  and  Loss  account  of  George  Hetherington. 

November  30.     The  Selhng  Expense  account  shows  a  loss  for  the  month  of  $678.96. 

30.     The  Merchandise  Trading  account  shows  a  profit  for  the  month  of 

$1,895.23. 
30.     The  General  Expense  account  shows  a  loss  for  the  month  of  $756.98. 
30.     During  the  month,  the  cashier,  in  making  change,  was  short  in  her  cash 

as  shown  by  the  cash  register,  $9.27, 


52  BOOKKEEPING   FOR  MODERN  BUSINESS 

Questions:  1.  What  was  the  total  amount  of  losses  for  November?  2.  Wliat  was  the 
total  amount  of  profits  for  November?  .3.  What  was  the  amount  of  net  profit  for  November? 
Explain.     4.  Analyze  each  record  following  the  method  used  in  analyzing  Exercise  45. 

Exercise  47 

The  Profit  and  Loss  account  in  the  books  of  Thomas  Brown. 
December  .31.     The  Selling  Expense  account  shows  a  loss  of  81,126.14. 

31.     The  General  Expense  account  shows  a  loss  of  81,462.11. 

31.     The  Merchandise  Trading  account  shows  a  profit  of  S2,210.17. 

Questions:  1.  What  docs  the  result  of  the  Profit  and  Loss  account  show?  2.  Where  is  the 
l)alance  of  the  Profit  and  Loss  account,  at  the  close  of  a  business  period,  carried?  3.  When  the 
credit  side  of  the  Profit  and  Loss  account  is  the  larger,  what  does  it  show?  The  debit  side? 
4.  Anah'ze  each  reconl  followmg  the  method  used  in  analyzing  Exercise  46. 

Exercise  48 

Determine  the  net  profit  or  loss  from  the  results  of  the  following  accounts: 

Merchandise  Trading  Selling  Expense  General  Expense 

(1) 81,000 .  00  Profit  $200 .  00  Loss  8300 .  00  Loss 

(2) 1 ,200 .  00  Profit  350 .  00  Loss  250 .  00  Loss 

(3) 600 .  00  Profit  350 .  00  Loss  400 .  00  Loss 

(4) 150 .  00  Loss  350 .  00  Loss  200 .  00  Loss 

(5) 700.00  Profit  250.00  Loss     '  450.00  Loss 

(6) 1 ,200 .  00  Profit  300 .  00  Loss  200 .  00  Loss 

The  transactions  given  in  the  two  following  exercises  involve  the  use  of  accounts  with 
Merchandise  Purchases,  Merchandise  Sales,  Freight  Inward,  IMerchandise  Inventory,  Mer- 
chandise Trading,  Selling  Expense,  General  Expense,  and  Profit  and  Loss.  Enter  each  trans- 
action in  the  proper  ledger  account.  Close  the  balance  of  the  Freight  Inward  account  into 
the  Merchandise  Purchases  account;  open  a  Merchandise  Trading  account  and  close  the 
balance  of  each  of  the  Merchandise  accounts  into  it;  open  a  Profit  and  Loss  account  and  close 
the  balance  of  the  Merchandise  Trading  and  the  Expense  accounts  into  it.  After  the  ledger 
accounts  have  been  properly  ruled,  hand  your  work  to  your  instructor  for  examination  and 

approval. 

Exercise  49  (Review) 

Transactions  affecting  the  Merchandise  and  Expense  accounts  in  the  books  of  Frank 
H.  Young,  Cleveland,  Ohio. 

January  1.     He  purchased  merchandise  valued  at  83,079.68. 

2.  He  paid  freight  charges  on  merchandise  bought,  835.46. 

3.  He  paid  the  rent  for  the  month,  8125.00. 

4.  He  sold  merchandise  amounting  to  8678.00. 

5.  Wrapping  paper  and  twine,  815.67. 

0.     Coal  i)ill,  824.56;  gas  bill,  811.34;  telegram,  83.50. 

8.  He  purchas(>d  merchandise  valued  at  82,234.27. 

9.  He  paid  friMglit  and  cartage  charges  on  merchandise  bought,  843.25. 

10.  He  received  a  rebate  on  freiglit  l)iil  of  yesterday,  83.25. 

11.  Hor.se-shoeing.  88.50;  driver's  wages,  815.00. 

12.  Rebate  on  coal  bill,  84.56. 


THE  PROPRIETOR'S  ACCOUNT  53 

January  13.  He  sold  merchandise  amounting  to  .it<2,456.37. 

15.  He  paid  freight  on  part  of  merchandise  sold  on  the  13th,  $3.67. 

17.  He  sold  merchandise  amounting  to  $1,123.45. 

21.  Meals  for  employees,  $7.80;  office  wages,  $50.00. 

24.  Newspaper  advertising,  $34.23;  printing  order  books,  $24.35. 

27.  Salesman's  expenses,  $56.67;  salesman's  salary,  $125.00. 

29.  He  sold  merchandise  amounting  to  $1,825.87. 

31.  Frank  H.  Young,  by  making  an  actual  count  of  all  unsold  merchandise  on 
hand,  found  he  had  merchandise,  valued  at  cost,  amounting  to  $1,911.23. 

Exercise  50  (Review) 

Transactions  affecting  the  Merchandise  and  Expense  accounts  in  the  books  of  W.  H. 

Martin,  Chicago,  111. 

February  1.  He  purchased  merchandise  valued  at  $4,234.22. 

2.  He  paid  freight  charges  on  merchandise  bought,  $34.67. 

3.  Warehouse  and  storage  charges,  $32.45. 

4.  He  returned  merchandise  amounting  to  $1,823.56. 
6.  Rent  for  the  month,  $150.00. 

8.  Coal  bill,  $56.78;  gas  bill,  $13.45. 

9.  He  purchased  merchandise  valued  at  $3,878.34. 

10.  He  sold  merchandise  amounting  to  $2,234.56. 

11.  Postage,  $15.00;  legal  expenses,  $50.00. 

12.  General  manager's  salary,  $250.00. 

13.  He  sold  merchandise  amounting  to  $1,511.24. 

14.  He  paid  freight  charges  on  a  part  of  the  goods  sold  yesterday,  $2.00. 

15.  Commission  allowed  to  selling  agent,  $34.56. 

16.  He  received  an  allowance  for  damaged  goods  purchased,  $34.23. 

17.  Merchandise  sold  on  the  13th  was  returned  to  him  amounting  to  $36.78. 
19.  He  paid  warehouse  storage  charges,  $39.20. 

21.  He  purchased  merchandise  valued  at  $879.00. 

24.  He  paid  freight  charges  on  merchandise  bought,  $11.23. 

27.  He  returned  merchandise  purchased  on  the  21st,  $234.56. 

28.  He  sold  merchandise  amounting  to  $2,234.56. 

28.     W.  H.  Martin,  by  making  an  actual  count  of  all  unsold  merchandise  on 
hand,  found  he  had  merchandise,  valued  at  cost,  amounting  to  $2,343.65. 

THE   PROPRIETOR'S   ACCOUNT 

The  Proprietor's  account  contains  a  record  of  the  amount  invested  at  the  beginning  of  the 
business,  any  additional  investments,  his  withdrawals  from  the  business,  and  his  profit  or 
loss  for  the  business  period. 

The  object  of  keeping  the  Proprietor's  account  is  to  show  the  interest  of  the  proprietor 
in  the  business. 

Illustrative  Exercise 

The  Capital  account  of  R.  D.  Smith. 

September  1.     R.  D.  Smith  invested  cash,  $4,000.00;     merchandise,    $2,250.00;    note 
receivable,  $1,250.00. 
5.     He  withdrew  merchandise  for  personal  use,  $25.00. 
12.     He  withdrew  cash  for  personal  use,  $100.00. 
20.     He  made  an  additional  cash  investment,  $1,500.00. 
30.     The  profit  of  the  business,  as  shown  by  the  Profit  and  Loss  account,  is 
$109.18.     Illustration  22. 


54 

Illustration  23 


BOOKKEEPING   FOR   MODERN  BUSINESS 


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/2 
30 


25 


£^/<?i:^ 


/g- 


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CU/^ 


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/ 
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30 


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22SO 
/2^<2 


f4f 


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rff^  /r 


Observations:  hehii  the  Proprietor's  account  to  show  the  amount  of  value  which  he 
withdraws  from  the  business  and  for  tlie  net  loss  of  the  business. 

Credit  the  Proprietor's  account  to  show  the  amount  of  value  which  he  invests  in  the 
business  and  for  the  net  profit  of  the  business. 
Analysis  of  the  Model  Proprietor's  Account: 

September  1,     The  Proprietor's  account  is  credited  for  the  cash,  $4,000.00;  merchandise, 
$2,250.00;   and  notes  receivable  $1,250.00,  to  show  the  value  of  these 
various  items  which  the  proprietor  invested  in  the  business. 
5.     The  Proprietor's  account  is  debited  with  $25.00,  to  show  the  value  of  the 

merchandise  which  he  witlidrew  from  the  business. 
12.     The  Proprietor's  account  is  debited  with  $100.00,  to  show  the  amount 

of  cash  which  he  withdrew  from  the  l)usiness. 
20.     The  Proprietor's  account  is  credited  with  $1,500.00,  to  show  the  additional 

amount  of  cash  which  he  invested  in  the  business. 
30.     The  Proprietor's  account  is  credited  with  $109.18,  for  the  amount  of  the 
net  profit  of  the  business  at  the  close  of  the  business  period. 

The  result  of  the  Proprietor's  account  shows  his  net  capital,  $8,984.18. 

The  result  of  a  Proprietor's  account  shovos  his  interest  in  the  business.  This  is  found  by 
taking  the  difference  between  the  two  sides  of  this  account. 

If  the  credit  side  of  the  account  is  larger,  it  shows  that  his  investment  plus  his  net  profit 
is  greater  than  his  withdrawals  or  net  loss.  This  condition  is  known  as  Nd  Cdpilal  dr  Present 
Worth. 

The  Net  Capital  or  Present  Worth  of  a  business  is  what  it  is  actually  worth  at  the  time 
in  question. 

If  the  debit  side  of  the  account  is  the  larger,  it  shows  that  his  withdrawals  from  or  losses 
of  the  business  are  greater  than  his  investments.     This  condition  is  known  as  insolvency. 


THE  PROPRIETOR'S  ACCOUNT  55 

Insolvency  is  the  inability  of  a  person  or  business  to  pay  all  its  debts. 

The  Proprietor's  account,  at  the  close  of  a  business  period,  is  closed  and  the  net  capital  or 
interest  in  the  business  is  brought  down  on  the  credit  side  of  the  account  to  show  the  amount 
of  his  net  capital  at  the  beginning  of  the  next  business  period. 

A  Personal  account  may  be  kept  with  the  proprietor  if  he  allows  himself  a  certain  amount 
for  salary.  When  this  is  done,  his  personal  bills  may  be  paid  from  the  funds  of  the  business 
and  the  amounts  charged  to  his  personal  account.  The  same  method  for  debiting  and  crediting 
his  capital  account  applies  to  his  personal  account.  This  account  is  more  frequently  used  in 
partnership  business. 

Exercises  for  the  Student 

Prepare  the  ledger  accounts  for  the  following  examples.  Enter  the  amount  first,  then  the 
date.  When  the  examples  are  completed,  hand  your  work  to  your  instructor  for  examination 
and  approval. 

Exercise  51 
The  Capital  account  of  L.  B.  Green. 

October  1.     L.  B.  Green  invested  cash,  $2,250.00;  merchandise,  $2,345.00. 
10.     He  withdrew  cash  for  personal  use,  $75.00. 
18.     He  withdrew  merchandise  for  personal  use,  $32.00. 
24.     He  withdrew  cash  for  personal  use,  $25.00. 
31.     The  net  profit  for  the  business  period  just  closing  is  $643.00. 

Questions:  1.  W^hat  is  the  object  of  keeping  the  Proprietor's  account?  2.  When  is  this 
Proprietor's  account  debited?  When  credited?  3.  Analyze  each  record  following  the 
method  used  in  analyzing  the  model  Proprietor's  account. 

Exercise  52 

The  Capital  account  of  D.  G.  King. 

November  1.     D.  G.  King  invested  cash,  $2,560-00;  notes  receivable,  $1,145.22;  merchan- 
dise, $1,855.00. 

11.  He  made  an  additional  cash  investment  of  $2,000.00. 

12.  He  withdrew  merchandise  for  personal  use,  $65.00. 
18.     He  withdrew  cash  for  personal  use,  $150.00. 

24.     He  withdrew  cash  for  personal  use,  $75.00. 

30.     At  the  close  of  November  the  Profit  and  Loss  account  showed  a  net  loss 
of  $325.00. 

Questions :  1 .  What  was  the  total "  amount  of  the  proprietor's  withdrawals  for  the 
month?  2.  What  was  the  total  amount  of  the  proprietor's  investments?  3.  What  is  the 
amount  of  the  proprietor's  net  capital  at  the  end  of  the  business  period?  4.  Analyze  each 
record  following  the  method  used  in  analyzing  Exercise  51. 

Exercise  53 

The  Capital  account  of  R.  M.  Shaw. 

December  1.     R.  M.  Shaw  invested  cash,  $3,000.00;  notes  receivable,  $1,500.00;  accounts 
receivable,  $1,800.00;  merchandise,  $2,300.00. 
5.     He  withdrew  merchandise  for  personal  use,  $35.00. 
9.     He  withdrew  cash  for  personal  use,  $65.00. 
15.     He  made  an  additional  cash  investment,  $1,200.00. 
22.     He  paid  a  personal  bill  of  $23.00  from  the  funds  of  the  business. 
30.     The  Profit  and  Loss  account  showed  a  net  profit  of  $425.00. 


A'itlidrawal 

Net  Profit 

Net  Loss 

$100.00 

S400.00 

400.00 

SlOO  00 

700.00 

330.00 

GOO. 00 
230.00 

4,600.00 

200.00 

2,000.00 

300.00 

56  BOOKKEEPING  FOR  MODERN  BUSINESS 

Questions:  1.  When  is  a  business  insolvent?  2.  Whon  the  Proprietor's  account  is 
closed  at  the  end  of  a  business  period,  where  is  the  balance  carried.  3.  When  is  a  Proprietor's 
Personal  account  usually  kept?  4.  Analyze  eacii  record  following  the  method  in  analyzing 
Exercise  52. 

Exercise  54  (Review) 

Determine  the  net  capital  or  the  net  insolvency  in  each  of  the  following  examples: 
Investment 

(1) S3,000.00 

(2) 4,400.00 

(3) 1,200.00 

(4) 3,330.00 

(5) 1,500.00 

(6) 4,400.00 

(7) 2,300.00 

Exercise  55  (Review) 

Interpret  the   following  accounts,   i.  e.,   state  which  are  asset  and  which  are  liability 
accounts,  what  accounts   are   used   in   determining   the   gross   trading   profit  or  loss,   what 

accounts  are  used  in  determining  the  net  profit  or  loss,  and  give  full  reasons  in  each  case: 

Name  of  the  Account                                   Debit  Credit 

(1)  Cash ."?1,200.00  $800.00 

(2)  William  Ford 560.00  200.00 

(3)  Notes  Payable 1,000.00  1,500.00 

(4)  S.  K.  Lee 345.00  745.00 

(5)  Merchandise  Purchases 2,535.25  35.25 

(6)  General  Expense 256.00  lO.OO 

(7)  Merchandise  Sales 11 .00  2,567.00 

(8)  Selling  Expense 345.67  5.67 

(9)  George  H.  Bowden 345.45 

(10)  Thomas  Wright 113.45 

(11)  Notes  Receivable 1,600.00  1,200.00 

A  Brief  Statement  to  Tell  When  to  Debit  and  When  to  Credit : 

In  the  i^tudy  of  the  preceding  accounts  it  has  been  seen  that  accounts  are  debited  and 
credited  as  follows: 

Debit  an  account  to  show  the 

f  (a)  which  a  person  has  received  from  the  business, 
value  -j  ib)  of  that  which  is  received  by  the  business. 
[  (c)  of  that  which  costs  value  to  the  business. 

Credit  an  account  to  show  the 

(  (a)  which  a  person  has  given  to  the  business, 
value  •;  (b)  of  that  which  is  disposed  of  by  the  business. 

I  (c)  of  that  which  produces  returns  to  the  business. 


PART   II 


DEVELOPMENT  OF  DEBIT  AND  CREDIT  IN  BOOKS  OF 

ORIGINAL  ENTRY 

THE   DOUBLE   EFFECT    OF   A   BUSINESS   TRANSACTION 

We  have  thus  far  studied  a  business  transaction  as  it  affects  but  one  account.  A  more 
careful  examination  of  a  business  transaction  reveals  the  fact  that  there  exists  an  equivalence 

of  exchanges.  . 

Example  i. -September  1.  If  Thomas  Brown  invests  cash,  $3,000.00,  m  the  flour 
and  grain  business,  it  must  be  clear  that  the  Cash  account  alone  is  not  sufficient  to  record 
this  transaction  completelv.  The  Cash  account  records  the  amounts  of,  I.  (a),  cash  received 
and,  II.  (a),  cash  paid  out,  but  it  fails  to  give  a  complete  account  of,  I.  (b),  the  sources  of  the 
cash  received  and,  II.  (b),  the  causes  of  the  cash  paid  out.  By  applying  the  prmciples 
already  learned  for  the  separate  accounts,  we  can  record  this  transaction,  as  follows,  showmg 
its  double  effect. 

Illustration  24 


Analysis.-The  Cash  account  is  debited  for  $3,000.00  to  show  the  amount  of  cash  received; 
and  Thomas  Brown's  Capital  account  is  credited  for  $3,000.00  to  show  the  value  which  he  has 

given  to  or  invested  in  the  business. 

(57) 


58 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Thus,  the  Cash  account  is  debited  to  show  the  amount  of  cash  received  by  the  business 
(one  efifect),  and  Thomas  Brown's  Capital  account  is  credited  to  show  the  vakie  which  he  has 
given  to  or  invested  in  the  business  (second  effect). 

Example  2. — September  2.  If  we  buy  from  F.  D.  Smith,  2,400  bushels  of  oats  at  75^ 
per  bushel  and  pay  cash,  we  part  with  one  form  of  value,  namely  cash.  In  return  we  receive 
an  equivalent  value  in  merchandise,  which  i."  the  cause  for  paying  out  cash.  By  applying 
the  principles  already  learned,  we  can  record  this  transaction,  as  follows,  showing  its  double 
effect. 

Illustration  26 


^^;; 


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£?/P 


Illustration  27 


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Jooc? 


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d£^' 


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£?(P 


Analysis.— The  Merchandise  Purchases  account  is  debited  for  §1,800.00  to  show  the  value 
(cost)  of  the  merchandise  received;  and  the  Cash  account  is  credited  for  $1,800.00  to  show 
the  amount  of  cash  paid  out. 

Thus,  the  ^Mercliandise  Purchases  account  is  debited  for  81,800.00,  (one  effect),  and  the 
Cash  account  is  credited  for  81,800.00  (second  effect). 

The  model  accounts  illustrate  clearly  the  two-fold  effect  of  the  above  transaction. 
Thi.s  transaction,  which  is  an  exchange  of  cash  for  mercliandise,  does  not  increase  or  decrease 
the  value  of  the  business.  The  amount  of  cash  on  hand  has  been  decreased,  81,800.00,  while 
merchandise  valued  at  81,800.00  has  been  acquired. 

Exam-ple  3. — September  '.^.  If  we  rent  a  storeroom  for  875.00,  we  part  witii  one  form 
of  value,  namely  ca.sh,  and  receive  in  return  an  equivalent  value,  namely  the  use  of  the 
storeroom  for  one  month.  Again  l\v  applying  the  principles  already  learned,  we  can  record 
this  transaction,  as  follows,  showing  its  double  effect. 


THE  DOUBLE  EFFECT  OF  A    BUSINESS   TRANSACTION 


59 


lUustration  28 


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Illustration  29 


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Analysis.— The  General  Expense  account  is  debited  for  $75.00  to  show  the  cost  of  the 
rent  incurred  in  the  general  management  of  the  business;  and  the  Cash  account  is  credited  for 
$75.00  to  show  the  amount  of  cash  paid  out. 

Thus,  the  General  Expense  account  is  debited  for  $75.00  (one  effect),  and  the  Cash  account 
is  credited  for  $75.00  (second  effect). 

The  model  accounts  again  illustrate  clearly  the  two-fold  effect  of  the  above  transaction. 
Cash  has  been  exchanged  for  the  use  of  the  storeroom.  The  amount  of  cash  on  hand  has 
been  decreased,  $75.00,  while  the  use  of  the  storeroom,  valued  at  $75.00,  has  been  acquired. 

Example  4.— September  4.  If  we  sell  B.  S.  Green,  625  bushels  of  oats  at  80^  per  bushel, 
receiving  cash,  $500.00,  for  it,  we  part  with  one  form  of  value,  merchandise,  and  receive 
in  return  an  equivalent  value  in  cash.  By  applying  the  principles  already  learned,  we  can 
record  this  transaction,  as  follows,  showing  its  double  effect. 

Illustration  30 


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Illustration  31 


BOOKKEEPING  FOR  MODERN  BUSINESS 


/72^4-«5^4^^^^?^^.:;^id£,^^J^^fa'^^<^ 


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C<52<i2^4/ 


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Analysis.— The  Cash  account  is  debited  for  SoOO.OO  to  show  the  amount  of  cash  received; 
and  the  Merchandise  Sales  account  is  credited  for  S500.00  to  show  the  value  of  the  merchan- 
dise sold  (parted  with). 

Thus,  the  Cash  account  is  debited  for  8500.00  (one  effect),  and  the  Merchandise  Sales 
account  is  credited  for  SoOO.OO  (second  effect). 

Example  5.— September  5.  If  we  purchase  1,000  bushels  of  oats  at  75^  per  bushel,  amount- 
ing to  $750.00,  from  William  Hill,  567  Arch  Street,  Philadelphia,  on  account,  it  must  be 
clear  that  the  Merchandise  Purchases  account  alone  is  not  sufficient  to  record  this  transac- 
tion completely.  The  Merchandise  Purchases  account  records  the  value  of  the  merchandise 
received,  but  it  fails  to  account  for  the  source  of  the  merchandise  received.  By  applying  the 
princir.les  already  learned  for  the  separate  accounts,  we  can  record  this  transaction,  as  follows, 
showing  its  double  effect. 


Illustration  32 


Illustration  33 


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/?^a^U^^^4o/uz^'J 


■/SO  0.7 


THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


61 


Analysis. — The  Merchandise  Purchases  account  is  debited  for  S750.00  to  show  the  value 
(cost)  of  the  merchandise  received;  and  William  Hill's  account  is  credited  for  $750.00  to  show 
the  value  which  he  has  given  to  the  business. 

Thus,  the  Merchandise  Purchases  account  is  dcljited  to  show  the  value  (cost)  of  the 
merchandise  received  (one  effect) ;  and  William  Hill's  account  is  credited  to  show  the  value 
which  he  has  given  to  the  business  (second  effect) . 

Example  6. — September  6.  If  we  sell  Frank  Wells,  234  Walnut  Street,  Philadelphia,  on 
account,  700  bushels  of  oats  at  80^  per  bushel,  amounting  to  $560.00,  it  must  be  clear  that 
the  Merchandise  Sales  account  alone  is  not  sufficient  to  record  this  transaction  completely. 
The  Merchandise  Sales  account  records  the  value  of  the  merchandise  parted  with,  but  it  fails 
to  account  for  the  cause  of  the  merchandise  sold.  By  applying  the  principles  already  learned 
for  the  separate  accounts,  we  can  record  this  transaction,  as  follows,  showing  its  double  effect. 

Illustration  34 


Illustration  35 


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Analysis. — Frank  Wells'  account  is  debited  for  $560.00  to  show  that  he  has  received 
value  from  the  business;  and  the  Merchandise  Sales  account  is  credited  for  $560.00  to  show 
the  value  of  the  merchandise  sold  (parted  with). 

Thus,  Frank  Wells'  account  is  debited  for  $560.00  (one  effect),  and  the  Merchandise 
Sales  account  is  credited  for  $560.00  (second  effect). 

Model  Set  of  Accounts 

The  following  model  ledger  shows  the  accounts  used  in  the  previous  transactions  arranged 
in  the  order  in  which  they  are  entered  in  the  ledger. 


62 

Illustration  36 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


G3 


A  Trial  Balance  of  Totals 

We  have  just  learned  in  the  previous  exercise  that  each  business  transaction  affects  more 
than  one  account.  One  account  was  debited  and  another  account  was  credited  in  each  trans- 
action. 

The  following  illustration  shows  the  accounts  used  in  the  previous  list  of  transactions,  and 
the  conditions  represented  by  these  transactions.  The  Cash  account  shows  that  $3,500.00 
has  been  received  and  $1,875.00  paid  out;  Frank  Wells'  account  shows  hini  to  be  in  our  debt 
to  the  extent  of  $560.00;  William  Hill's  account  shows  that  the  business  owes  him  $750.00; 
Thomas  Brown's  account  shows  that  he  has  invested  $3,000.00  in  the  business;  the  Mer- 
chandise Purchases  account  shows  that  $2,550.00  worth  of  merchandise  has  been  purchased; 
the  IMerchandise  Sales  account  shows  that  $1,060.00  worth  of  merchandise  has  been  sold; 
the  General  Expense  account  shows  that  $75.00  has  been  paid  out  for  an  expense  incurred  in 
conducting  the  business. 

Since  the  debits  entered  in  the  ledger  accounts  equal  the  credits  entered  in  the  ledger 
accounts,  it  naturally  follows  that  the  sum  of  all  debit  entries  should  equal  the  sum  of  all 
credit  entries.     If  it  does,  the  ledger  accounts  are  said  to  be  "m  balance." 

A  trial  balance  is  a  list  or  schedule  of  ledger  accounts  prepared  for  the  purpose  of  ascer- 
taining whether  the  total  of  the  debits  equals  the  total  of  the  credits. 

The  following  illustrates  the  form  of  a  trial  balance  of  totals  taken  from  the  model 
ledger.  Illustration  36. 

Illustration  37 


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s6o 


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Instructions  for  preparing  a  Trial  Balance  of  Totals  from  the  Model  Ledger  accounts, 
Illustration  36. 

(1)  Foot  in  small  pencil  figures  the  debit  and  credit  sides  of  each  account  when  there  are 

two  or  more  debit  or  credit  entries  in  the  account  as  shown  in  the  model  ledger. 

(2)  At  the  top  of  a  sheet  of  journal  paper,  write  the  heading,  Trial  Balance,  September 

6,  19—. 


64  BOOKKKEPINCi   FOR   MODERN   BUSINESS 

(3)  List  the  accounts  in  the  order  in  which  they  occur  in  the  model  ledger,  writing  the 

total  debits  and  total  credits  opposite  each  account  in  the  list.  In  the  column  to 
the  left  of  the  name  of  an  account,  place  the  ledger  page  on  which  the  account 
appears. 

(4)  Rule  a  single  red  line  under  the  last  item  in  the  list,  and  foot  the  columns.     The 

footings  of  the  debit  and  credit  columns  should  be  equal.  Rule  the  double  red 
lines  under  the  footings  as  shown  in  the  illustration. 

Supplementary  Exercises  in  Accounts 

The  transactions  given  in  these  exercises  involve  the  use  of  accounts  with  the  Proprietor, 
Cash,  Merchandise  Purchases,  Merchandise  Sales,  (general  Expense,  and  Personal  accounts. 
Give  each  account  one-third  of  a  page.     Use  ledger  paper. 

Since  each  business  transaction  affects  more  than  one  account,  show  the  two-fold  effect 
of  each  transaction  by  recording  the  debit  and  the  corresponding  credit  entry  in  the  proper 
ledger  accounts. 

After  you  have  recorded  the  transactions  in  the  proper  accounts,  write  the  sum  in  pencil, 
or  pencil-foot  the  ledger  accounts  and  prepare  a  trial  balance  of  totals.  The  work  should  then 
be  submitted  to  your  instructor  for  examination  and  approval. 

Exercise  56 

September  1.  William  Gray  begins  business  with  a  cash  investment  of  S3,600.00. 

2.  He  rents  a  storeroom  paying, cash  -175.00, for  September. 

4.  He  buys  merchandise  for  cash  valued  at  -ISOOO.OO. 

6.  He  sells  merchandise  for  cash  amounting  to  $350.00. 

8.  He  buys  merchandise  for  cash  valued  at  $357.89. 

10.  He  sells  merchandise  for  cash  amounting  to  .$678.98. 

12.  He  buys  merchandise  for  cash  valued  at  $567.56. 

14.  He  buys  merchandise  from  T.  B.  Williams,  325  State  St.,  City,  on  account, 

$450!00. 

16.  He  sells  merchandise  to  S.  A.  King,  345  Fourth  Ave.,  City,  on  account, 

$769.79. 

18.  He  sells  merchandise  for  cash  amounting  to  $134.27. 

20.  He  makes  an  additional  cash  investment  of  $1,200.00. 

26.  He  buys  merchandise  for  cash  valued  at  $234.00. 

30.  He  sells  merchantlise  for  cash  amounting  to  .$352.63. 

Analyze  each  transaction  following  the  method  used  in  Illustration  36. 

Exercise  57  A 

October  1.     George  Taylor  invests  $5,000.00  cash  in  the  flour  and  grain  business. 
2.     He  rents  a  storeroom,  paying  $85.00  cash, for  October. 
4.     He  buys  merchandise  for  cash  vahunl  at  $1,600.00. 
6.     He  sells  merchandise  for  cash  amounting  to  .$234.56. 
8.     He  buys  office  sui)plies,  paying  $12.50  cash. 
10.     He  l)uys  merchandise  for  cash  valued  at  $1,234.76. 
12.     He  biiys  merchandise  from  Cieorge  L.   Jones,  456  Market  St.,   City,  on 

account,  $438.57. 
14.     He  sells  merchaTulise  for  casl»  ainoiinling  to  .'==;3S2.7S. 

16.     He  sells  merchandise  to  R.  D.  Thompson,  324  Broadway,  City,  on  account, 
$456.36. 


THE  DOUBLE   EFFECT  OF  A   BUSINESS   TRANSACTION 


65 


October   18.     He  makes  an  additional  cash  investment  of  SI, 000.00. 
20      He  biij's  merchandise  for  cash  valued  at  S432.65. 
22.     He  sells  merchandise  to  Thomas  Ryan,  352  Broad  St.,  City,  on  account, 

8586.73. 
24.     He  withdraws  cash,S100.00,  for  private  use. 
26.     He  buys  merchandise  from  George  L.  Jones,  456  Market  bt.,  City,  on 

account,  $426.63. 
28.     He  buys  office  stationery,  paying  S23.45  cash. 
30.     He  sells  merchandise  for  cash  amounting  to  $232.32. 

Exercise  57  B 

November  1.     Harry  Blair  began  business  with  a  cash  investment,  $5,000.00. 

2.  Paid  cash  for  rent  of  storeroom,  $75.00. 

3.  Bought  merchandise  from  James  Green,  534  West  Ave.,  City,  on  account, 

$3,500.00.  ^       ^. 

4.  Sold  Merchandise  to  Louis  McBane,  792  State  St.,  City,  on  account, 

$840.00. 

5.  Bought  merchandise  for  cash,  $800.00. 

6.  Received  cash  from  Louis  McBane,  on  account,  $625.00. 

8.  Sold  merchandise  for  cash,  $630.00. 

9.  Paid  James  Green  cash,  on  account,  $3,000.00. 

10.  Sold  merchandise  to  George  Roberts,  527  Wilson  Ave.,  City,  on  account, 

$260  00. 

11.  Bought  merchandise  from  John  Riley,  403  Washington  Lane,  City,  on 

account,  .$420.00. 

12.  Bought  merchandise  for  cash,  $230.00. 

13.  Sold  merchandise  for  cash,  $360.00. 

15.  Sold  merchandise  to  Louis  McBane  on  account,  $640.00. 

16.  Received  cash  from  George  Roberts  on  account,  $160.00. 

17.  Paid  John  Riley  cash, on  account,  .$333.00. 

18.  Received  cash  from  Louis  McBane  on  account,  $220.00. 

19.  Paid  cash  for  merchandise,  $360.00. 

20.  Sold  merchandise  to  Louis  McBane  on  account,  $275.00. 

22.  Sold  merchandise  to  George  Roberts  on  account,  $425.50. 

23.  Bought  merchandise  for  cash,  $375.80. 

24.  Received  cash  from  Louis  McBane  on  account,  $230.00. 

25.  Paid  James  Green  cash,  on  account,  $325.00. 

26.  Bought  merchandise  for  cash,  $534.67. 

27.  Sold  merchandise  for  cash,  $325.60. 

29.  Sold  merchandise  to  Louis  McBane,  on  account,  $472.00. 

30.  Paid  clerk  hire  in  cash,  $75.00. 

Journalizing 

Thus  far  attention  has  been  directed  to  the  two-fold  effect  of  each  business  transaction  as 
it  occurred,  and  its  record  in  the  proper  ledger  accounts. 

Since  every  business  transaction  carried  out,  and  every  agreement  relating  to  the  business 
should  be  carefully  recorded,  at  the  time,  under  the  date,  and  in  the  order  of  its  occurrence,  a 
more  complete  record  should  be  made  than  is  usually  possible  in  the  ledger  accounts. 

While  the  journal,  as  a  book  of  record  is  used  in  this  bookkeeping  text  only  where  its 
use  would  be  justifiable  from  the  standpoint  of  practical  bookkeeping,  yet  the  principles 
underlying  business  transactions  may  be  best  understood  when  expressed  in  the  form  of 
journal  entries. 


66 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Example  1. — September  1.  The  student  who  recorded  Thomas  Brown's  cash  invest- 
ment of  S3, 000. 00  (see  illustrations  24  and  25)  did  so  by  mentally  deciding  the  double  effect 
of  this  transaction  and  recording  it  in  the  ledger  accounts. 

The  Cash  account  was  debited  to  show  the  amount  of  cash  received;  and  Thomas  Brown's 
Capital  account  was  credited  to  show  the  value  which  he  invested  in  the  business. 

By  applying  these  principles  he  thus  recorded  this  transaction  showing  its  double  effect. 


Illustration  38 


C..€ZcdJ7y 


_/^i*<rr»7<**^=lt*^#'»«' 


JOOC 


Illustration  39 


K^^/,yf>z-'tP'?^7^i^€^L<^py':^^--i^^  L.^<z^i-<^c<:z.''Cy 


^>J-e^i^.-  /    L-^cz-d-'Ay 


Jooa 


00 


xnstead  of  recording  the  double  effect  of  the  above  transaction  immediately  in  the  proper 
ledger  accounts,  he  might  have  recorded  it  in  the  journal,  and  thus  be  able  to  explain  the 
transaction  clearly  and  fully  so  that  it  may  be  properly  interpreted  by  any  one  who  may 
examine  the  books. 

By  applying  the  same  principles  used  in  making  the  records  directly  into  the  proper  ledger 
accounts  wc  can  record  this  transaction  in  the  journal  showing  its  double  effect. 


Journal  Illustrated 


Illustration  40 


ro>    (2)     (3^ 


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(-V 


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The  following  is  an  explanation  of  the  use  which  is  made  of  each  ruled  space  in  the  journal, 
the  number  corresponding  to  the  number  inserted  in  the  illustrated  journal  entry. 


THE   DOUBLE   EFFECT   OF  A   BUSINESS   TRANSACTION 


67 


Illustration  41 


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(3) 
(4) 


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(1)  Folio  Column.— The  folio  is  left  blank  at  the  time  of  making  the  entry.     The  purpose 
of  this  column  will  be  explained  later. 

(2)  Debit  Position  .—The  name  of  the  account  to  be  debited  is  always  written  just  to  the 
right  of  the  ledger  folio  column. 

Credit  Position. — The  name  of  the  account  to  be  credited  is  written  on  the  next  hne 

against  the  vertical  hne  to  the  left  leaving  a  wide  margin. 
Date  Positio7i.— The  date  of  the  transaction  is  written  just  to  the  right  of  the  vertical 

line  separating  the  name  of  the  accounts  from  the  explanation  colmim. 

(5)  Explanation  Column. — A  complete  explanation  of  the  transaction  is  written  in  this 

space.  If  your  instructor  prefers,  the  explanation  may  be  written  immediately  below 
the  journal  entry  m  spaces  3  and  5,  the  writing  extending  from  the  single  vertical 
line  bounding  space  3  on  the  left  to  the  first  money  column  bounding  space  5  on  the 
right.  Both  methods  are  used  in  the  business  office.  From  actual  classroom 
experience,  the  form  given  in  the  model  journal  entry  is  less- confusing  in  elemen- 
tary bookkeeping  because  each  space  is  used  for  a  definite  purpose. 

(6)  Debit  Money  Column. — The  debit  amount  is  entered  in  the  first  money  column  on  the 

same  line  with  the  name  of  the  account  to  be  debited. 

(7)  Credit  Money  Column. — The  credit  amount  is  entered  in  the  second  money  column  cTn 

the  same  line  with  the  name  of  the  account  to  be  credited. 

Journalizing  is  determining  the  proper  accounts  to  be  debited  and  credited  for  each 
transaction. 

How  a  Journal  Entry  is  Read. — The  journal  entry  is  read  or  stated  as  follows:  Cash, 
to  Thomas  Brown,  Capital,  3,000.00.  The  name  of  the  account  to  be  debited  is  always 
read  first,  followed  by  the  word  to  and  the  name  of  the  account  to  be  credited.  The  amount 
is  named  but  once,  as: 

September  1.     Cash,  to  Thomas  Brown,  Capital,  S3,000.00. 

Orally  journaHze  all  the  remaining  transactions  named  in  Illustrations  26  to  35  inclusive, 
and  give  full  reasons  in  each  case.     For  instance, 

September  2.     Merchandise  Purchases,  to  Cash,  $1,800.00,  etc. 

The  following  model  journal  illustrates  the  method  and  form  of  recording  the  six  business 
transactions  named  in  Illustration  36. 


68  BOOKKEEPING   FOR   MODERN  BUSINESS 

Model  Journal  Illustrated 


Illustration  42 


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Exercises  for  the  Student 

Journalize  the  following  transact  ions,  making  the  proper  record  ni  the  journal.  When 
the  exercises  are  completed,  hand  your  work  to  your  instructor  for  examination  and  approval. 
Keep  the  work  for  a  subsequent  exercise. 


THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION  69 

Exercise  58 

September  1.     George  Bunn  began  business  investing  cash,  $3,500.00. 

2.  He  paid  $75.00  for  the  rent  of  the  store  for  September. 

3.  He  bought  from  F.  A.  Faloon,  on  account,  500  bu.  oats  at  50^  per  bu., 

$250.00. 
5,     He  bought  from  Andrew  Rodgers,  on  account,  1,000  bu.  wheat  at  $1.25 

per  bu.,  $1,250.00. 
9.     He  sold  to  Charles  Smith,  on  account,  200  bu.  oats  at  75^  per  bu.,  $150.00. 
10.     He  bought  from  Andrew  Haines,  on  account,  400  bu.  oats  at  505!^  per 

bu.,  $200.00. 

12.  He  sold  to  John  Hudson,  for  cash,  300  bu.  wheat  at  $1.50  per  bu.,  $450.00. 

13.  He  bought  from  Charles  Cameron,  for  cash,  1,000  bu.  oats  at  50j/5  per  bu., 

$500.00. 

14.  He  paid  Andrew  Haines  cash,  $200.00,  for  the  oats  purchased  on  the  10th. 

15.  He  sold  to  H.  R.  Shaff,  for  cash,  600  bu.  oats  at  75f^  per  bu.,  $450.00. 
20.     He  paid  F.  A.  Faloon  cash,  $250.00,  for  the  oats  purchased  on  the  3d. 
25.     He  received  from  Charles  Smith,  cash  $150.00  for  the  oats  sold  him  on 

the  9th. 
30.     He  bought  from  F.  A.  Faloon,  on  account,  450  bu.  oats  at  50^  per  bu., 
$225.00. 

Analyze  each  transaction  and  compare  your  journal  with  the  model  Illustration  42  for 
the  form  and  arrangement  of  your  entries. 

Exercise  59 

October  1.     L.  L.  Tucker  began  business  by  investing  cash,  $3,200.00. 
2.     He  paid  $65.00  for  the  rent  of  the  store  for  October. 
4.     He  paid  the  clerk's  salary,  cash  $75.00. 

6.     He  bought  500  bu.  oats  at  50^  per  bu.,  $250.00,  from  D.  K.  Lee  on  account. 
8.     He  bought  from  J.  J.  Johnson,  on  account,  1,000  bu.  wheat  at  $1.25  per  bu., 

$1,250.00. 
11.     He  sold  to  Lawson  &  Company,  on  account,  500  bu.  wheat  at  $1.50  per 

bu.,  $750.00. 
13.     He  bought  from  Price  Engle,  on  account,  600  bu.  oats  at  52(f  per  bu.,  $312.00. 

15.  He  paid  D.  K.  Lee  cash,  $250.00,  for  the  oats  purchased  on  the  6th. 

16.  He  sold  Charles  White,  for  cash,  100  bu.  wheat  at  $1.55  per  bu.,  $155.00. 

18.  He  took  for  private  use,  cash  $50.00.  ^ 

19.  He  paid  Price  Engle  cash,  $312.00,  for  the  oats  purchased  on  the  13th. 
24.     He  received  from  Lawson  &  Company  cash,  $750.00,  for  the  wheat  sold  them 

on  the  11th. 
28.     He  bought  from  Milton  Jones,  on  account,  800  bu.  oats  at  52^  per  bu., 

$416.00. 
30.     He  sold  to  Lawson  &  Company,  on  account,  555  bu.  oats  at  77^  per  bu., 

$415.25. 

Analyze  each  transaction  and  compare  your  journal  with  the  model  Illustration  42  for 
the  form  and  arrangement  of  your  entries. 

Exercise  60 

November  1.     William  A.  McBane  began  business  by  investing  cash,  $4,200.00. 
2.     He  paid  cash,  $70.00,  for  the  rent  of  the  store  for  November. 
He  paid  cash,  $30.00,  for  books  and  stationery. 

4.  He  bought  from  William  Black,  on  account,  2,400  bu.  oats  at  50jz!  per  bu., 

$1,200.00. 


70 


BOOKKEEPING  FOR  MODERN  BUSINESS 


November  6. 

8. 
10. 
14. 

18. 

24. 


He  bought  from  Homer  Faloon,  on  account,  1,150  bu.  wheat  at  $1.26  per 

bu.,  SI. 449.00. 
He  sold  to  Stephen  Bunn,  for  cash,  650  bu.  oats  at  76^  per  bu.,  $494.00. 
He  sold  to  Ernest  Race,  on  account,  450  bu.  oats  at  77^  per  bu.,  .S346.50. 
He  paid  William  Black  cash,  .?1,200.00,  for  the  oats  purchased  from  him 

on  the  4th. 
He  sold  to  Nelson  &  Son,  on  their  10-day  note,  500  bu.  oats  at  SI. 50  per 

bu.,  «750.00. 
He  bought  from  William  Black,  on  his  10-day  note,  500  bu.  oats  at  50)if 

per  bu.,  $250.00. 


Classification  of  Books 

Books  of  Original  Entry. — The  books  in  which  transactions  are  first  recorded  at  the 
time  of  their  occurrence  are  known  as  books  of  original  entry.  The  book  of  original  entry 
which  you  have  studied  thus  far  is  the  journal. 

Books  of  Final  Entry. — The  principal  book  of  final  entry  is  the  ledger.  Transactions  are 
transferred  from  the  books  of  original  entry  to  the  ledger,  where  they  are  gathered  together 
or  classified  into  various  groups  or  accounts  such  as  the  Proprietor's  account,  the  Cash  account, 
the  General  Expense  account,  etc. 

Auxiliary  Books. — These  are  books  in  which  are  recorded  additional  information  of  facts 
necessary  to  keep  a  complete  record  of  the  business. 

Posting 

Since  a  record  of  a  business  transaction  in  the  journal  simply  indicates  which  account  is 
to  be  debited  and  which  account  is  to  be  credited  in  the  ledger,  journalizing  is  an  incomplete 
process.  The  accounts  to  be  debited  and  the  accounts  to  be  credited  must  be  opened  in  the 
ledger  and  the  amounts  must  be  transferred  from  the  journal  to  the  ledger,  where  they  are 
gathered  together  or  classified  into  the  various  groups  or  accounts.  This  act  of  transfer- 
ring to  the  ledger  is  called  posting. 

Example  1. — September  1.  The  student  who  recorded  Thomas  Brown's  cash  invest- 
ment of  $3,000.00  in  the  journal  in  Illustration  41  did  so  by  mentally  deciding  what  accounts 
were  affected  by  the  transaction,  i.  e.,  what  account  was  to  be  debited  and  what  account  was 
to  be  credited  in  the  ledger  before  recording  the  transaction  as  follows: 

Illustration  43 


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00 


THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


71 


As  the  above  journal  entry  indicates  that  the  Cash  account  should  be  debited  to  show  the 
amount  of  cash  received,  and  Thomas  Brown's  Capital  account  should  be  credited  to  show 
the  amount  of  cash  which  he  invested  in  the  business,  these  two  accounts  are  opened  in  the 
ledger  and  the  $3,000.00  transferred  to  the  proper  side  of  the  accounts  as  determined  in  the 
journal  entry. 

Posting  to  the  Cash  Account 

The  amount,  $3,000.00  is  posted  to  the  debit  side  of  the  Cash  account,,  the  record  being 
made  in  the  following  order: 

First,  write  $3,000.00  in  the  amount  column;  second,  write  1,  the  page  of  the  journal 
in  the  folio  column  and  the  initial  J  just  to  the  left  of  the  folio  colmnn  to  indicate  the  book 
from  which  the  entry  is  posted;  third,  write  Thomas  Brown  in  the  explanation  column;  fourth, 
write  Sept.  1  in  the  date  column,  placing  the  current  year  above  the  first  entry  to  indicate 
the  year. 

The  following  illustrates  the  form  of  the  Cash  account  after  the  $3,000.00  has  been  posted 
to  it  from  the  journal. 


Illustration  44 


C^-tZcdJiy 


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JOOO  00 


Postmarking  the  Entries. — Next,  write  1 ,  the  page  of  the  ledger  to  which  the  amount 
has  been  posted,  in  the  folio  column  of  the  journal.  As  each  item  is  posted,  the  page  of  the 
ledger  to  which  it  has  been  transferred  is  placed  in  the  column  immediately  to  the  left  of  the 
journal  entry  as  shown  in  Illustration  43. 

Do  not  fail  to  put  the  page  number  in  the  folio  column  at  the  time  of  posting.  The  page 
numbers  in  the  journal  act  as  checks,  showing  what  items  have  been  posted  and  where  any 
particular  item  may  be  found  in  the  ledger.  The  page  numbers,  together  with  the  initial  J 
in  the  ledger  accounts,  indicate  the  book  and  the  page  of  the  book  from  which  the  item  was 
posted. 

Posting  the  Proprietor's  Account 

The  amount,  $3,000.00,  is  posted  to  the  credit  side  of  Thomas  Brown's  Capital  account 
in  the  exact  order  that  was  used  in  making  the  record  in  the  Cash  account.  Review  the  order 
carefully. 

The  following  illustrates  the  form  of  Thomas  Brown's  Capital  account  after  the  $3,000.00 
has  been  posted  to  it  from  the  journal. 


72 

Illustration  45 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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Jooc 


oc 


Postmarking  the  Entries. — Next,  write  7.  the  page  of  the  ledger  to  which  the  amount 
has  been  posted,  in  the  foho  column  in  the  journal,  as  shown  in  Illustration  43. 

The  second  journal  entry  is  posted  in  the  same  way.  The  Merchandise  Purchases  account 
is  debited  and  the  Cash  account  is  credited  with  $1,800.00,  the  amount  of  the  cash  purchase 
of  merchandise  on  the  2d. 

The  third,  fourth,  fifth,  and  sixth  journal  entries  are  posted  in  a  similar  way. 

Exercise  61 

On  a  sheet  of  journal  papsr  copy  neatly  the  model  journal  shown  in  Illustration  42,  fol- 
lowing carefully  the  script  forms  for  both  letters  and  figures.  Always  write  the  current  year  in 
full,  instead  of  19 — . 

Preparatory  to  posting  these  transactions  to  the  ledger,  the  following  accounts  are  to  be 
opened  in  the  ledger,  in  the  order  given,  allowing  one-third  of  a  page  to  each  account. 

The  addresses  of  all  persons  should  be  shown  in  the  ledger,  the  street  address  should  be 
written  above  the  explanation  space  on  the  debit  side,  and  the  city  and  state  above  the 
explanation  on  the  credit  side  as  shown  in  the  model  set  of  accounts  in  Illustration  36. 

Cash. 

Frank  Wells,  234  Walnut  Street,  Philadelphia. 

William  Hill,  5G7  Arch  Street,  Philadelphia. 

Thomas  Brown,  Capital. 

Merchandise  Purchases. 

Merchandise  Sales. 

General  Expense. 

Review  caicfully  the  method  of  posting  the  model  journal  entry  given  above.  Post  the 
six  journal  entries  to  the  proper  ledger  accounts  following  the  same  method  and  order  as  was 
used  in  posting  the  model  form.  Be  sure  to  postmark  each  entry  after  it  has  been  posted  to 
the  ledger. 

Foot  in  small  pencil  figures  the  dcl^it  and  credit  sides  of  each  account  wh{>n  there  are  two 
or  more  debit  or  credit  entries  in  the  account. 

On  the  following  page  of  your  journal  prepare  a  trial  l)alance  of  totals.  List  the  accounts 
in  the  order  in  whicii  they  occur  in  the  ledger,  writing  the  total  debits  and  total  credits  opposite 
each  account.  Add  and  rule  the  trial  balance.  The  work  should  then  be  submitted  to  your 
instructor  for  examination  and  approval. 


THE  DOUBLE  EFFECT   OF  A    BUSINESS   TRANSACTION  73 

Exercise  62 

The  transactions  given  in  these  exercises  involve  the  use  of  accounts  with  the  Proprietor, 
Cash,  Notes  Receivable,  Notes  Payable,  Merchandise  Purchases,  Merchandise  Sales,  General 
Expense,  and  Personal  accounts.     Give  each  account  one-third  of  a  page  in  the  ledger. 

After  you  have  recorded  the  transactions  in  the  journal,  post  the  various  items  to  the 
proper  ledger  accounts,  pencil-foot  the  ledger  accounts  and  prepare  a  trial  balance  of  totals. 
The  work  should  then  be  submitted  to  your  instructor  for  examination  and  approval. 

October  1.     W.  A.  Thompson  began  business  investing  cash,  $4,200.00. 

2.  He  paid  $75.00  for  the  rent  of  the  store  for  October. 

3.  He  bought  from  T.  S.  Andrew,  252  Green  St.,  City,  on  account,  600  bu. 

oats  at  50^  per  bu.,  $300.00. 
5.     He  sold  to  C.  D.  Lewis,  922  Wallace  St.,  City,  on  account,  200  bu.  oats  at 

75^  per  bu.,  $150.00. 
9.     He  bought  from  M.  L.  Green,  1122  Broad  St.,  City,  for  cash,  700  bu.  wheat 

at  $1.12  per  bu.,  $784.00. 

12.  He  bought  from  T.  S.  Andrew,  on  account,  1200,  bu.  oats  at  50^  per  bu., 

$600.00. 

13.  He  sold  to  C.  D.  Lewis,  on  his  30-day  note,  300  bu.  wheat  at  $1.50  per  bu., 

$450.00. 
15.     He  bought  from  T.  S.  Andrew,  on  his  10-day  note,  500  bu.  wheat  at  $1.15  per 

bu.,  $575.00. 
20.     He  received  from  C.  D.  Lewis,  cash,  $150.00,  for  the  oats  sold  him  on  the  5th. 
25.     He  paid  T.  S.  Andrew,  cash,  $575.00,  for  his  note  due  to-day. 
30.     He  took  for  private  use,  cash,  $65.00. 

Exercise  63 

If  further  preliminary  practice  is  needed  in  journahzing,  posting,  and  taking  a  trial 
balance,  record  the  transactions  in  Exercise  56. 

Exercise  64 
Journalize,  post,  and  take  a  trial  balance  of  the  transactions  in  Exercises  57-a  and  57-b. 

Exercise  65 

If  further  preliminary  practice  is  needed  in  posting  and  taking  a  trial  balance,  post 
the  journal  which  the  student  prepared  for  Exercise  58. 

Exercise  66 

Post  the  journal  and  take  a  trial  balance  for  Exercises  59  and  60. 

Development  of  the  Sales  Journal 

So  far  in  making  original  entries  in  the  journal  every  sale  of  merchandise  has  been  recorded 
as  a  credit  to  the  Merchandise  Sales  account,  and  involved  the  posting  of  at  least  two  items 
for  each  transaction,  namely,  the  credit  of  Merchandise  Sales,  and  the  debit  which  explains 
the  cause  for  parting  with  the  merchandise.  Thus,  each  sale  required  the  writing  of  the 
words  Merchandise  Sales,  and  at  least  two  amounts,  one  for  the  account  to  be  debited 
and  the  other  for  the  account  to  be  credited.     Now,  since  the  credit  items  are  posted  to  the 


74 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Merchandise  Sales  account  in  the  ledger  and  there  added,  we  may  save  many  entries  in  the 
ledger  bj'  recording  similar  transactions  in  a  separate  book  and  posting  only  the  total  amount 
of  all  sales  for  a  given  period  to  the  Merchandise  Sales  account  in  the  ledger. 

Illustrative  Exercise 

Transactions  affecting  the  Merchandise  Sales  account  in  the  books  of  I.  B.  Cameron. 
September  1.     He  sells  to  N.  0.  Race,  1110  Broad  St.,  on  account,  400  bu.  oats  at  7b^ 
per  bu.,  S300.00. 
8.     He  sells  to  M.  N.  Lee,  714  State  St.,  800  bu.  oats  at  7d6  per  bu.,  .?600.00. 
21.     He  sells  to  L.  K.  Jones,  117  Fourth  Ave.,  1.200  bu.  oats  at  75j^  per  bu., 

8900.00. 
30.     He  sells  to  J.  K.  Scott,  238  Lake  St.,  on  account,  200  bu.  rye  at  $1.25  per 
bu.,  8250.00. 

Journal  Method 
The  following  illustrates  the  method  of  recording  the  foregoing  transactions  in  the  journal. 

Illustration  46 

September   1,    19- 


N. 

0. 

Race 

on  account 

300 

00 

Mdse . 

Sales 

400  bu.  oats 

8 

on  account 

.75 

1 

300 

00 

M. 

N. 

Lee 

600 

00 

Mdse. 

Sales 

800  bu.  oats 
21 

.75 

600 

00 

L. 

K. 

Jones 

on  account 

900 

00 

Mdse. 

Sales 

1200  bu.  oats 
30 

.75 

900 

00 

J. 

K. 

Scott 

on  account 

250 

00 

Mdse. 

Sales 

200  bu.  rye 

1.25 

1 

250 

00 

Observe  the  repetition  of  the  credit  to  the  Merchandise  Sales  account  in  each  transac- 
tion. In  posting  from  the  journal,  each  person's  account  is  debited  for  the  amount  of  the 
sale,  and  the  Merchandise  Sales  account  is  credited  for  the  amount  of  each  sale  as  shown  in 
the  following  illustration. 


Illustration  47 


Merchandise  Sales 


19- 
Sept, 


1 

N. 

0. 

Race 

J 

1  300 

00 

8 

M. 

N. 

Lee 

J 

600 

00 

21 

L. 

K. 

Jones 

J 

900 

00 

30 

J. 

K. 

Scott 

J 

i  250 
2050 

00 
00 

THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


75 


It  is  quite  evident  from  the  foregoing  journal  entries  and  ledger  account  that  the  unneces- 
sary repetition  of  the  credit  Merchandise  Sales  might  be  avoided  if  certain  pages  of  the 
journal  were  reserved  exclusively  for  the  sales.  Instead  of  crediting  the  Merchandise  Sales 
account  each  time  some  other  item  is  debited,  the  Merchandise  Sales  account  may  be  credited 
for  the  sum  of  these  debits  as  shown  in  the  following  modified  form  of  the  journal. 


Illustration  48 


September  1,  19- 


N.  0.  Race 

on  account 
400  bu.  oats 
8 

.75 

M.  N.  Lee 

on  account 
800  bu.  oats 
21 

.75 

L.  K.  Jones 

on  account 
1200  bu.  oats 
30 

.75 

J.  K.  Scott 

on  account 
200  bu.  rye 

30 

1.25 

Mdse.  Sales  Credited 

total  sales 

300 


600 


900 


250 


00 


00 


00 


00 


2050  00 


Observe  that  the  modified  form  of  the  journal  entry  contains  exactly  the  same  complete 
information  that  the  previous  journal  contained.  In  posting  from  the  modified  form  of  the 
journal,  each  person's  account  is  debited  for  the  amount  of  the  sale  to  him,  l3ut  the  Merchan- 
dise Sales  account  is  credited  for  the  sum  total  of  all  the  sales  instead  of  being  credited  for 
each  sale  as  shown  in  the  following  illustration. 


Illustration  49 


Merchandise  Sales 


19- 
Sept. 

30 

Total  Sales  S 


2050 


00 


Compare  the  result  of  the  Merchandise  Sales  account  which  contains  the  four  items 
posted  from  the  journal  with  the  Merchandise  Sales  account  which  contains  but  one  item 
posted  from  the  modified  form  of  the  journal.  It  will  be  observed  that  the  results  are  the 
same,  namely,  $2,0.50.00.  The  unnecessary  repetition  of  the  credit  Merchandise  Sales 
has  thus  been  avoided  by  reserving  certain  pages  of  the  journal  exclusively  for  the  sales.  The 
initial  »S  is  substituted  for  the  initial  J  in  the  ledger  account  to  show  that  the  posting 


76 


BOOKKEEPING  FOR  MODERN  BUSINESS 


was  done  from  the  sales  journal  instead  of  from  tlic  joiiinal.  The  initial  S  is  substituted  also 
in  each  of  the  four  personal  accounts  instead  of  the  initial  J  for  the  same  reason. 

The  usual  practice  in  business  is  to  make  out  bills  containing  an  itemized  list  of  goods 
sold  when  a  sale  is  made.  Instead  of  making  out  l)ills  singly  with  the  pen  or  typewriter,  they 
can  be  made  in  duplicate  on  the  tj'pewriter  or  on  a  billing  machine  by  the  use  of  carbon  paper. 
The  original  or  copy  of  the  bill  is  mailed  or  handed  to  the  customer  and  a  copy  is  filed  in  order 
that  the  business  may  have  a  complete  and  permanent  record  of  all  sales  made  by  the  business. 

The  record  or  entry  is  made  in  the  sales  journal  from  the  copy  of  the  bill,  and  after  the 
sales  number  has  been  written  on  it,  the  bill  is  filed.  These  copies  are  referred  to  by  dates 
or  number  so  that  the}'  are  always  available  for  reference. 

Smce  the  copy  of  the  bill  contains  a  complete  record  of  the  sale,  the  journal  may  be  still 
further  modified.  Instead  of  making  a  complete  record  of  the  sale  in  the  journal,  we  may 
avoid  making  a  full  record  by  using  a  journal,  specially  ruled,  wliich  will  give  the  necessary 
information  for  posting  and,  if  need  be,  through  the  sales  number,  aid  us  in  finding  the  copy 
of  the  bill  which  was  filed,  when  detailed  information  is  needed. 

The  following  illustrates  the  form  of  a  sales  journal  which  may  be  used  when  a  duplicate 
copy  of  a  bill  is  filed. 

Sales  Journal 

Illustration  50 


ACCOUNT  DEBITED 


^J€^ 


/ 

F 

2/ 

3o 

3o 


///O. 


//■/ 


\^Si^€?e^>J^ 


■yc 


c^-T-iyy?^ 


/ 
2 
3 


300 


I^OOOO 


m. 


2^C 

2   o  s  o 


2  O^C  OO 


oo 


Compare  the  above  sales  journal  with  the  modified  form  of  the  journal  of  Illustration  48. 
The  sales  journal  contains  the  same  information  as  the  modified  form  of  the  journal  except 
the  itemized  list  of  the  goods  sold.  The  bills,  containing  the  itemized  list  of  the  goods  sold, 
are  numl^ercd  (■ons(H'utively  as  they  are  issued,  and  a  record  of  this  is  made  in  the  Sales  Number 
cohjnm.  The  bills  are  then  filed  where  they  are  kept  as  a  permanent  record  for  the  merchan- 
dise sold. 


1. 


Exercise  67 

Design  a  sales  journal  on  a  sheet  of  journal  paper  exactly  like  the  model  sales  journal 
(see  Illustration  50).  The  headings  of  the  columns  should  be  lettered.  Record  in 
it  the  various  sales  in  Exercise  58.  Number  the  sales  consecutively  as  they  are 
entered  in  the  sales  journal.  Close  the  sales  journal  at  the  end  of  the  month  similarly 
to  the  model  sales  journal. 

Design  another  sales  journal  and  record  the  sales  given  in  I'^xercise  59.  Follow  the 
same  met  iiod  used  in  the  first  exercise  given  above. 


THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


77 


3.  Design  another  sales  journal  and  enter  the  sales  given  in  Exercise  60. 

sales  journal  at  the  end  of  the  month. 

4.  Design  another  sales  journal  and  enter  the  sales  given  in  Exercise  62. 

sales  journal  at  the  end  of  the  month. 


Close  the 
Close  the 


Development  of  the  Purchases  Journal 

Again  in  making  original  entries  in  the  journal  every  purchase  of  merchandise  has  been 
recorded  as  a  debit  to  the  Merchandise  Purchases  account,  and  involved  the  posting  of  at 
least  two  items  for  each  transaction,  namely,  the  debit  of  Merchandise  Purchases,  and  the 
credit  which  explains  the  source  from  which  the  merchandise  was  received.  Thus,  each 
purchase  required  the  writing  of  the  words  Merchandise  Purchases,  and  at  least  two 
amounts,  one  for  the  account  to  be  debited  and  the  other  for  the  account  to  be  credited. 
Since  the  debit  items  are  posted  to  the  Merchandise  Purchases  account  in  the  ledger  and 
there  added,  we  may  save  many  entries  in  the  ledger  by  recording  similar  transactions  in  a 
separate  book  and  posting  only  the  total  amount  of  all  purchases  for  a  given  period  to  the 
Merchandise  Purchases  account. 

Illustrative  Exercise 

Transactions  affecting  the  Merchandise  Purchases  account  in  the  books  of  Robert  Savage. 
September  1.     He  buys  merchandise  from  T.  B.  Williams,  325  State  St..  City,  on  account, 
500 "bu.  oats  at  70c^  per  bu.,  S350.00. 
16.     He  buys  merchandise  from  F.  A.  Ross,  112  Fourth  Ave.,  City,  on  account, 

800  bu.  oats  at  70cf  per  bu.,  $560.00. 
30.     He  buys  from  A.  L.  Wilson,  234  Penn  St.,  City,  on  account,  130  bu.  rye 
at  S1.20  per  bu.,  $156.00. 

Journal  Method 

The  following  illustrates  the  method  of  recording  the  foregoing  merchandise  transactions 
of  Robert  Savage  in  the  journal. 

Illustration  51 

September  1,  19- 


Mdse.  Purchases 

T.  B.  Williams 

Mdse.  Purchases 
F.  A.  Ross 

Mdse.  Purchases 
A.  L.  Wilson 


on  account 

500  bu.  oats 

16 

on  account 

800  bu.  oats 

30 

on  account 

130  bu.  rye 


350 

00 

.70 

350 

560 

00 

.70 

560 

156 

00 

1.20 

156 

00 


00 


00 


Observe  the  repetition  of  the  debit  to  the  Merchandise  Purchases  account  in  each  trans- 
action. In  posting  from  the  journal,  each  person's  account  is  credited  for  the  amount  of  the 
purchase  from  him,  and  the  Merchandise  Purchases  account  is  debited  for  the  amount  of 
each  purchase  as  shown  in  the  following  illustratioa. 


78 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Illustration  52 


Merchandise  Purchases 


19- 
Sept. 


1  T.  B.  Williams  J 
16  F.  A.  Ross  J 
30,  A.  L.  Wilson   J 


350 

00 

560 

00 

156 

00 

1066 

00 

It  is  quite  evident  from  the  foregoing  journal  entries  and  ledger  account  that  the  unneces- 
sary repetition  of  the  debit  Merchandise  Purchases  might  also  be  avoided  if  certain  pages 
of  the  journal  were  reserved  exclusively  for  the  purchases.  Instead  of  debiting  the  Merchan- 
dise Purchases  account  each  time  some  other  item  is  credited,  the  Merchandise  Purchases 
account  may  be  debited  for  the  sum  of  these  debits  as  shown  in  the  following  modified  form  of 
the  journal. 

Illustration  53 

September  1,  19- 


T.  B.  Williams 


on  account 
500  bu.  oats 
16 

on  account 
800  bu.  oats 
30 

on  account 
130  bu.  rye 
30 
Mdse.  Purchases  Debited  total  purchases 


F.  A.  Ross 


A.  L.  Wilson 


.70 


70 


1.20 


1066'00 


350 


560 


156 


00 


00 


00 


Observe  that  the  modified  form  of  the  journal  contains  exactly  the  same  complete  informa- 
tion that  the  previous  journal  contained.  In  posting  from  the  modified  form  of  the  journal, 
each  person's  account  is  credited  for  the  amount  of  our  purchase  from  him  ])ut  the  Merchan- 
dise Purchases  account  is  debited  for  the  sum  of  all  the  purchases  instead  of  being  debited  for 
each  purchase  as  shown  in  the  following  illustration. 

Illustration  54 

Merchandise  Purchases 


19- 
Sept, 


30 


Total  Purchases  P 


1066 


00 


Compare  the  result  of  the  Merchandise  Purchases  account  which  contains  the  three 
items  posted  from  the  journal  witli  the  Merchandise  Purchases  account  which  contains  but 
one  item  posted  from  the  modified  form  of  the  journal.     It  will  be  observed  that  the  results 


THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


79 


are  the  same,  namely  $1,066.00.  The  unnecessary  repetition  of  the  debit  Merchandise  Pur- 
chases has  thus  been  avoided  by  reserving  certain  pages  of  the  journal  exclusively  for  the 
purchases. 

The  initial  P  is  substituted  for  the  initial  J  in  the  ledger  account  to  show  that  the  posting 
was  done  from  the  purchases  journal  instead  of  from  the  journal.  The  initial  P  is  substituted 
also  in  each  of  the  three  personal  accounts  instead  of  the  J  when  the  posting  is  done  from 
the  purchases  journal. 

The  Purchases  Journal 

Just  as  the  record  of  the  merchandise  sales  was  taken  from  the  general  journal  and 
grouped  in  the  sales  journal  in  order  to  avoid  the  unnecessary  repetition  of  the  credit  Mer- 
chandise Sales,  so  may  the  record  of  the  merchandise  purchases  be  grouped  in  the  purchases 
journal  in  order  to  avoid  the  unnecessary  repetition  of  the  debit  Merchandise  Purchases. 

Since  an  invoice,  containing  an  itemized  list  of  goods  bought,  is  received  when  merchandise 
is  purchased,  a  complete  record  need  not  be  made  from  the  invoice.  This  may  be  avoided  by 
using  a  journal,  specially  ruled,  which  will  give  the  necessary  information  for  the  posting  and, 
if  need  be,  through  the  invoice  number,  aid  us  in  finding  the  invoice  in  our  files,  when  detailed 
information  is  needed. 

The  following  illustrates  the  form  of  a  purchases  journal  which  may  be  used  when  the 
invoices  are  properly  filed. 
Ulustration  55 

Purchases  Journal 


DATE 

L.F.. 

ACCOURT  CREDITED 

ADDRESS 

TERMS 

mv.        MDSE.  PUR- 
NO.  _   CHASES  DR. 

-7^ 

/ 

/6 
JO 
JO 

/ 
2 
3 

3~J0.00- 

s6d\  oo 
/sC  oo 

■U:Jitz.<d^<=,^u::£j^^.^C£^ 

/o  66 

oa 

Compare  the  above  purchases  journal  with  the  modified  form  of  the  journal  of  Illustration 
48.  The  purchases  journal  contains  the  same  information  as  the  modified  form  of  the  journal 
except  the  itemized  list  of  the  goods  purchased.  The  invoices  are  numbered  consecutively 
as  they  are  received,  and  a  record  of  this  is  made  in  the  Invoice  Numher  column.  The 
invoices  are  then  filed  where  they  are  kept  as  a  permanent  record  of  the  merchandise  purchased. 

Exercise  68 

1.  Design  a  purchases  journal  on  a  sheet  of  journal  paper  exactly  like  the  model  purchases 
journal  (see  Illustration  55).  The  headings  of  the  columns  should  be  lettered. 
Record  in  it  the  various  purchases  named  in  Exercise  50.  Number  the  purchases 
consecutively  as  thev  are  entered  in  the  purchases  journal.  Close  the  purchases 
journal  at  the  end  of  the  month  similarly  to  the  model  purchases  journal. 


80 


BOOKKEEPING  FOR   MODERN  BUSINESS 


2.  Design  other  purchases  journals  antl  record  the  purchases  given  in  Exercises  59,  60 
and  02.     Follow  the  same  method  used  in  the  previous  (>xercise. 

Development  of  the  Cash  Journal  or  One  Page  Cashbook 
Just  as  the  record  of  merchandise  sales  and  merchandise  purchases  was  taken  from  the 
general  journal  and  grouped  in  the  sales  journal  and  in  the  purchases  journal  respectively,  in 
order  to  avoid  the  unnecessary  repetition  of  the  credit  Merchandise  Sales  and  the  debit  Mer- 
chandise Pio'chases,  so  may  the  record  for  the  cash  receipts  and  cash  payments  be  grouped 
in  a  cash  journal  in  order  to  avoid  the  unnecessary  repetition  of  the  debit  Cash  and  credit 
Cash. 

Illustrative  Exercise 
The  following  transactions  are  taken  from  the  books  of  H.  H.  Harris. 
September  1.     He  invested  cash,  $5,000.00. 

11.     He  received  cash  from  J.  K.  Johnson  on  account,  .^SOO.OO. 

19.     He  received  cash  from  Earl  Rand  for  his  note  due  to-day,  .S200.00. 

30.     He  received  cash  from  Lewis  and  (Iray  on  account,  $500.00. 

Journal  Method 

The  following  illustrates  the  method  of  recording  the  foregoing  cash  receipts  transactions 
in  the  journal. 

Illustration  56 

September  1,  19- 


Cash 


H.  H.  Harris,  Capi 


Cash 


J.  K.  Johnson 


Cash 


Notes  Receivable 


Cash 


Lewis  &  Gray 


Investment 

tal 

11 

on  account 

19 

Earl  Rand  pays  his 

note  due  to-day 

30 

on  account 


5000  00 


300 


00 


5000 


00 


200  00 


30000 


20000 


500  00 


ll  50000 


Observe  the  repetition  of  the  debit  Cash  in  each  transaction.  In  posting  from  the 
journal,  each  credit  amount  is  entered  in  its  respective  account,  and  the  Cash  account  is 
debited  for  the  amount  of  each  cash  receipt  as  shown  in  the  following  illustration. 

Illustration  57 

Cash 


19- 
Sept. 


1  H.  H.  Harris  J 

11  J.  K.  Johnson  J 

19  Notes  Receivable  J 

30,  Lewis  &  Gray  J 


5000;00 
300,00 
20000 
500'00 

eooo'oo 


THE   DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION 


81 


It  is  quite  evident  from  the  foregoing  journal  entries  and  ledger  account  that  the  unneces- 
sary repetition  of  the  del^t  Cash  might  bo  avoided  if  certain  pages  of  the  journal  were 
reserved  exclusively  for  the  cash  receipts  as  shown  in  the  following  illustration. 


Illustration  58 


Date 

L.F. 

Account  Credited 

Explanation 

CashDr. 

Total 

19- 

Sept. 

1 

H.  H.  Harris,  Capital 

Investment 

5000 

00 

11 

J.  K.  Johnson 

on  account 

300 

00 

19 

Notes  Receivable 

Earl  Rand's  note 

200 

00 

30 

Lewis  &  Gray 

Cash  Debited 

on  account 

500 

00 

6000 

00 

For  convenience  we  put  the  term  Cash  in  the  account  credited  column,  but  it  is  really 
not  a  credit.  To  distinguish  it  from  accounts  credited,  therefore,  we  add  Debited  to  it  because 
it  represents  the  total  amount  of  cash  received  by  the  business.  Observe  that  the  cash  journal 
contains  exactly  the  same  complete  information  that  the  previous  journal  contained.  In 
posting  from  the  cash  journal,  each  credit  amount  is  entered  in  its  respective  account,  but  the 
Cash  account  is  debited  for  the  sum  of  all  cash  receipts  instead  of  being  debited  for  each  cash 
receipt  as  shown  in  the  following  illustration. 

Illustration  59 

Cash 


19- 
Sept. 


30 


Total  Receipts 


6000 


00 


Compare  the  result  of  the  Cash  account  which  contains  the  four  items  posted  from  the 
journal  with  the  Cash  account  which  contains  but  one  item  posted  from  the  cash  journal. 
It  will  be  observed  that  the  results  are  the  same,  namely,  $6,000.00. 

The  initial  C  is  substituted  for  the  initial  /  in  the  ledger  account  to  show  that  the  posting 
was  done  from  the  cash  journal  instead  of  from  the  journal.  The  initial  C  is  substituted 
also  in  each  of  the  four  credit  accounts  instead  of  the  initial  J  when  posting  is  done  from  the 
cash  journal. 

Exercise  69 

Design  a  cash  journal  on  a  sheet  of  journal  paper  exactly  like  the  model  cash  journal 
(see  Illustration  58).  The  headings  of  the  columns  should  be  lettered.  Record  in 
it  the  various  cash  receipts  in  Exercise  50.  Close  the  cash  journal  at  the  end  of  the 
month  similarly  to  the  model  cash  journal. 

Design  another  cash  journal  and  record  the  cash  receipts  given  in  Exercise  59.  Follow 
the  same  method  used  in  the  first  exercise  given  above. 

Design  other  cash  journals  and  enter  the  cash  receipts  given  in  Exercises  GO  and  62. 
Close  each  journal  at  the  end  of  the  month. 


82 


BOOKKEEPIXa   FOR   MODERN  BUSINESS 


Development  of  the  Cash  Journal  or  One  Page  Cashbook 

The  cash  payments  may  also  be  grouped  in  a  cash  journal  in  order  to  avoid  the  unneces- 
sary repetition  of  the  credit  Cash. 

Illustrative  Exercise 

The  following  transactions  were  taken  from  the  books  of  H.  H.  Harris. 

September  1.     He  paid  875.00  for  the  rent  of  the  storeroom  for  September, 
9.     He  paid  Robert  Burns  cash  on  account,  .S400.00. 
22,     He  paid  Thomas  ]\Ioore  cash  for  his  note  due  to-day,  $525,00, 
29,     He  paid  Wilham  Gardner  cash  on  account,  $500.00. 


Illustration  60 


Journal  Method 

September  1,    19- 


General  Expense 

Rent  for  September 

75 

00 

Cash 

9 

on  account 

75 

00 

Robert  Burns 

400 

00 

Cash 

22 

400 

00 

Notes  Payable 

Note  in  favor  of 

525 

00 

Cash 

Thomas  Moore  due  to-day 
29 

525 

00 

William  Gardner 

on  account 

500 

00 

Cash 

500 

00 

Observe  the  repetition  of  the  credit  Cash  in  each  transaction.  In  posting  from  the 
journal,  each  debit  amount  is  entered  in  its  respective  account,  and  the  Cash  account  is 
credited  for  the  amount  of  each  cash  payment  as  shown  in  the  following  illustration. 

Illustration  61 

Cash 


1 

19- 
Sept. 

1 

9 

22 

29 

General  Expense  J 

Robert  Burns  J 

Note  Payable  J 

William  Gardner  J 


75  00 

400  00 

525  00 

500  00 

1500  00 


It  is  quite  evident  from  tlie  foregoing  journal  entries  and  ledger  account  that  the  unneces- 
sary repetition  of  the  credit  Cash  might  be  avoided  if  certain  pages  of  the  journal  were 
reserved  exclusively  for  the  cash  payments  as  shown  in  (lie  following  illustration. 


THE  DOUBLE  EFFECT  OF  A    BUSINESS   TRANSACTION 


83 


Illustration  62 


Date 


19- 
Sept. 


1 

9 

22 

29 


L.F. 

Account  Debited 
General  Expense 

Explanation 

Rent  for  September  i 

Robert  Burns 

on  account 

Notes  Payable 

Thomas  Moore's  note 

William  Gardner 

on  account 

Cash  Credited 

ICash  Or, 


75 
400 
525 
500 


00 
00 
00 
00 


Total 


1500 


00 


You  will  observe  that  the  entries  in  the  journal  are  different  in  form  from  the  cash  journal 
entries,  but  they  serve  the  same  purpose. 

In  posting  from  the  cash  journal,  each  debit  amount  is  entered  in  its  respective  account, 
but  the  Cash  account  is  credited  for  the  sum  of  all  the  cash  payments  instead  of  being  credited 
for  each  cash  payment  as  shown  in  the  following  illustration. 

Illustration  63 

Cash 


19- 
Sept. 

1 
30 

Total  payments  C 


1500 


00 


Compare  the  result  of  the  Cash  account  which  contains  the  four  items  posted  from  the 
journal  with  the  Cash  account  which  contains  but  one  item  posted  from  the  cash  journal. 
It  will  be  observed  that  the  results  are  the  same,  namely,  $1,500. 00. 

Exercise  70 

1.  Design  a  cash  journal  on  a  sheet  of  journal  paper  exactly  like  the  model  cash  journal 

(see  Illustration  62).  The  headings  of  the  columns  should  be  lettered.  Record  in 
it  the  various  cash  payments  named  in  Exercise  50.  Close  the  cash  journal  at  the 
end  of  the  month  similarly  to  the  model  cash  journal. 

2.  Design  another  cash  journal  and  record  the  cash  payments  named  in   Exercise  59. 

Follow  the  same  method  used  in  the  first  exercise  given  above. 

3.  Design  other  cash  journals  and  enter  the  cash  payments  in  them  given  in  Exercises 

60  and  62.     Close  each  cash  journal  at  the  end  of  the  month. 

A  Two  Page  Cash  Journal  or  Cashbook 

It  has  become  quite  customary  to  arrange  the  two  cash  journals  in  one  book,  the  left- 
hand  page  being  used  for  the  receipts  of  cash,  and  the  adjoining  right-hand  page  for  the  pay- 
ments of  cash.  The  left-hand  page  is  known  as  the  debit  side,  the  meaning  being  that  the 
Cash  account  is  to  be  debited  for  the  sum  of  the  amounts  there  recorded;    and  the  right- 


84 


Illustration  64 


BOOKKEEPING  FOR  MODERN  BUSINESS 

A  Two  Page  Cash  Journal  or 

Cash  Receipts 


Accouirr  cseoitbd 


BXPLAlCATIOIf 


=^ 


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hand  page  is  known  as  the  credit  side,  the  meaning  being  that  the  Cash  account  is  to  be 
credited  for  the  sum  of  the  amounts  there  recorded.  This  segregation  of  the  cash  receipts 
and  cash  payments  in  one  book  is  permissible  since  all  cash  receipts  are  debits,  and  all  cash 
payments  are  credits. 

The  student  is  cautioned  not  to  think  of  the  separate  items  on  the  debit  side  of  the  cash- 
book  as  being  debited.  Remember  that  they  indicate,  just  as  in  the  case  of  journal  entries, 
that  in  each  instance  the  Cash  account  is  to  be  debited,  and  the  other  account  is  to  be  credited. 
Each  separate  item  is  simply  the  credit  portion  of  a  full  journal  entry,  and  it  must,  therefore, 
be  credited  in  the  ledgc^r  to  show  the  source  of  the  cash  received. 

A  two  page  cash  journal  or  cashbook  may  be  constructed  by  placing  the  one  page  cash 
journal  of  Illustration  58  showing  cash  receipts  on  the  left-hand  or  debit  side,  and  the  one 
page  cash  journal  of  Illustration  62  showing  cash  payments  on  the  right-hand  or  credit  side 
as  shown  in  Illustration  64. 

Observations:  1.  To  place  an  amount  in  the  money  column  of  the  debit  side  of  the 
cashbook  indicates  that  the  Cash  account  is  to  be  debited. 

2.  To  place  the  name  of  an  account  on  the  debit  side  of  the  cashbook  in  the  Account 
Credited  column  indicates  that  that  account  is  to  be  credited. 

3.  To  place  an  amount  in  the  money  column  on  the  credit  side  of  the  cashbook  indicates 
that  the  Cash  account  is  to  be  credited. 

4.  To  place  the  name  of  an  account  on  the  credit  side  of  the  cashbook  in  tiic  Account 
Debited  eoluiim  indicates  that  that  account  is  to  be  dehitcHl. 

Balancing  the  Cashbook. — The  cashbook  is  balanced  in  sulistantially  the  same  way  that 
the  ledger  account  of  cash  is  balanced.  Care  should  be  taken,  however,  in  bringing  the  bal- 
ance down  to  the  opposite  side,  as  it  must  be  placed  in  the  second  money  column  so  that  it 


THE  DOUBLE  EFFECT  OF  A    BUSINESS   TRANSACTION 


85 


Cashbook  Illustrated 

Illustration  65 


Cash  Payments 


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EXPLANATION 


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will  not  be  again  posted  to  the  ledger.  Future  postings  to  the  Cash  account  in  the  ledge? 
must  be  only  for  new  receipts  and  payments  of  cash.  The  ledger  account  Cas/i  wiU  then 
show  the  same  balance  as  the  cashbook. 


Exercise  71 


1. 


Design  a  cashbook  on  a  sheet  of  journal  paper  exactly  like  the  model  cashbook 
(see  Illustration  64).  The  headings  of  the  columns  should  be  lettered.  Record  in 
it  the  various  cash  receipts  and  cash  payments  given  in  Exercise  50.  Close  the 
cashbook  at  the  end  of  the  month  similarly  to  the  model  cashbook,  and  bring  down 
the  balance. 

2.  Design  another  cashbook  and  record  the  cash  receipts  and  cash  pajanents  in  them 

given  in  Exercise  59.     Follow  the  same  method  used  in  the  first  exercise  given  above. 

3.  Design    other     cashbooks  and  enter  the  cash  receipts  and  cash  payments  in  them 

given  in  Exercises  60  and  62.     Close  each  cashbook  at  the  end  of  the  month  and 
bring  down  the  balance. 

Exercises  for  the  Student 

If  you  have  made  a  careful  study  of  the  preceding  pages,  you  should  have  little  difficulty 
in  entering  the  following  transactions  in  the  cashbook,  purchases  journal,  and  sales  journal. 
Number  the  purchases  and  sales  consecutively  as  they  are  entered  in  the  purchases  journal 
and  sales  journal,  beginning  with  invoice  number  1  in  the  purchases  journal  and  sales  number  1 
in  the  sales  journal.  Opportunity  will  be  given  later  to  write,  handle,  and  study  business 
papers. 

Design  a  cashbook,  purchases  journal,  and  sales  journal.  Use  loose  journal  and  ledger 
paper.  The  headings  of  the  columns  should  be  lettered.  Record  in  them  the  following 
transactions,  after  which  close  the  books  at  the  end  of  each  month  as  previously  instructed. 
When  the  examples  are  completed,  hand  your  work  to  your  instructor  for  examination  and 
approval. 


86 


BOOKKEEPIXG  FOR  MODERN  BUSINESS 


2. 
3. 

4. 


Exercise  72 

September  1.     C.  T.  Kirkbrido  ongased  in  the  flour  and  grain  business    at  324  Euclid 

Ave.,  City,  investing  cash,  83,500.00. 
He  paid  H.  A.  Ginn  rent  of  store  for  September,  in  cash,  875.00. 
He  bought  of  W.  E.  Ashton,  235  Penn  St.,  City,  on  account,  500  bu.  wheat, 

at  SI. 25  per  bu. 
He  bought  of  M.  W.  Martin,  1122  State   St.,  City,  on   account  at   10 

days,  1 ,500  bu.  oats  at  50^  per  bu. 

5.  He  sold  Walter  E.  Mej^er,  123  Superior  .^ve.,  City,  on  account,  GOO  Ini. 
oats  at  75(f  per  bu. 

6.  He  sold  C.  H.  Bowman  &  Co.,  456  Union  Ave.,  City,  on  account  at  20 
days,  200  l)u.  wheat  at  81.70  per  bu. 

8.  He  paid  W.  E.  Ashton  cash,  8300.00,  in  part  payment  of  invoice  of  the  3d. 

9.  He  bought  of  W.  E.  Ashton,  on  account,  700  bu.  rye  at  81.05  per  bu. 
(Address  given  in  previous  transaction.) 

10.  He  sold  David  Lane,  2323  Broad  St.,  City,  on  account,  400  bu.  oats  at 
75^  per  bu. 

11.  He  paid  W.  E.  Ashton  cash,  8325.00,  in  full  payment  of  invoice  of  the  3d. 

12.  He  received  cash  from  Walter  E.  Mever,  8200.00,  in  part  pavment  of  bill 
of  the  5th. 

13.  He  paid  \l.  W.  IMartin  cash,  8750.00,  in  full  pavment  of  invoice  of  the 
4th. 

15.  He  bought  of  L.  L.  Tucker,  1134  State  St.,  Citv,  on  account,  100  bbl. 
flour  at  87.65  per  bbl. 

16.  He  sold  David  Lane,  on  account,  20  bbl.  flour  at  $8.75  per  bbl. 

17.  He  received  cash  from  David  Lane,  8300.00,  in  full  pa^^nent  of  bill  of  the 
10th. 

18.  He  bought  of  M.  AV.  Martin,  on  account,  1,000  bu.  oats  at  50?f  per  bu. 

19.  He  paid  W.  E.  Ashton  cash,  $235.00,  in  part  payment  of  invoice  of  the  9th. 

20.  He  sold  C.  H.  Bowman  &  Co.,  on  account,  30  bbl.  flour  at  S8.75  per  bbl. 

22.  He  paid  L.  L.  Tucker  cash,  8765.00,  in  full  pa\Tnent  of  invoice  of  the  15th. 

23.  He  received  cash  from  Walter  E.  Meyer,  8250.00,  in  full  pajanent  of  bill 
of  the  5th. 

24.  He  paid  W.  E.  Ashton  cash,  8500.00,  in  full  of  invoice  of  the  9th. 

26.  He  received  cash  from  C.  H.  Bowman  &  Co.,  8340.00,  in  full  paMnent  of 
bill  of  the  6th. 

27.  He  sold  Walter  E.  Meyer,  on'account  at  10  days,  400  bu.  rye  at  $1.25  per 
bu. 

29.  He  sold  David  Lane,  on  account,  600  bu.  oats  at  75j!J  per  bu. 

30.  He  paid  cash  for  clerk  hire,  $70.00. 


October  1. 

2 

4 


10 

12 
14 


Exercise  73 

Robert  Benson  engaged  in  the  flour  and  grain  business  at  592  Fifth  Ave., 

City,  investing  cash,  84,500.00. 
He  paid  L,  A.  .James  rent  of  store  for  October,  in  cash,  $80.00. 
He  bought  of  A.  H.  Rogers,  2534  Fourth  Ave.,  City,  on  account,  100  bbl. 

flour  at  87.70  per  bbl. 
He  bought  of  Martin  Brown,  567  School  Lane,  Citv,  on  account  at  10  days, 

800  bu.  wheat  at  81.25  per  bu. 
He  sold  Hart  Bros.,  115  John  St..  City,  25  bbl.  flour  at  8S.S0  per  bl)l. 
He  sold  Richard  Cilson,  135  Front  St.,  City,  on  account  at  20  days,  500  bu. 

wheat  at  81.75  per  bu. 
He  paid  A.  H.  Rogers  cash,  8500.00,  in  part  payment  of  invoice  of  the  4th. 
He  received  casli  from  Hart  Bros.,  8220.00,  in  full  payment  of  bill  of  the  8th. 


THE  DOUBLE  EFFECT  OF  A   BUSINESS   TRANSACTION  87 

October  16.     He  paid  Martin  Brown  cash,  $1,000.00,  in  full  payment  of  invoice  of  the  6th. 
18.     He  bought  of  W.  A.  McBane,  1092  Pitt  St.,  City,  on  account,  1,400  bu.  oats 

at  50^  per  bu. 
20.     He  sold  Hart  Bros.,  on  account,  50  bbl.  flour  at  S8.80  per  bbl. 

22.  He  bought  of  Charles  Smith,  389  Spring  Ave.,  City,  on  account,  1,100  bu. 

rye  at  $1.0.5  per  bu. 

23.  He  bought  of  A.  H.  Rogers,  on  account  at  10  days,  50  bbl.  flour  at  $7.75  per 

bbl. 

24.  He  sold  W.  A.  McBane,  on  account,  700  bu.  rye  at  $1.22  per  bu. 

25.  He  received  cash  from  A.  H.  Rogers,  $270.00,  in  full  of  invoice  of  the  4th. 

26.  He  received  cash  from  W.  A.  McBane,  $700.00,  in  full  payment  of  bill  of 

18th. 

27.  He  paid  Charles  Smith  cash,  $655.00,  in  part  payment  of  invoice  of  the  22d. 

29.  He  sold  Richard  Gilson,  on  account,  1,100  bu.  oats  at  75^  per  bu. 

30.  He  received  cash  from  Richard  Gilson,  $875.00,  in  full  payment  of  bill  of  the 

10th. 

31.  He  paid  the  bookkeeper's  salary  for  October,  in  cash,  $85.00. 


PART  III 

THE  FLOUR  AND  GRAIN  BUSINESS  WITHOUT 
BUSINESS  PAPERS 

William  H.  Brown,  Proprietor 

The  preceding  exercises  have  been  planned  to  give  the  student  a  knowledge  of  accounts 
and  of  the  simplest  forms  of  bookkeeping.  As  a  means  of  illustrating  further  the  method  of 
recording  business  transactions  in  the  books  of  original  entry,  of  transferring  or  posting  these 
to  the  proper  ledger  accounts,  and  of  preparing  the  trial  balance,  the  following  transactions 
are  now  presented. 

The  books  used  are  the  journal,  the  cashbook,  the  purchases  journal,  the  sales  journal, 
and  the  ledger.  Be  sure  that  each  transaction  is  entered  in  the  proper  book  and  a  full 
explanation  is  given. 

Since  a  record  of  a  business  transaction  in  the  journal,  the  cashbook,  the  purchases  journal, 
or  the  sales  journal  simply  indicates  which  account  is  to  be  debited  and  which  account  is  to  be 
credited,  and  later  must  be  posted  to  the  proper  ledger  account,  open  the  following  accounts  in 
the  ledger.  Beginning  on  page  1,  enter  in  the  order  given,  three  accounts  on  each  page.  You 
will  be  instructed,  from  time  to  time,  when  to  post  from  the  books  of  original  entry  to  these 
ledger  accounts. 

Accounts  receivable  are  the  Personal  accounts  that  show  the  amounts  due  from  regular 
customers  of  the  business.  As  a  rule  these  accounts  will  be  far  more  numerous  than  anj'  other 
class  of  accounts.  Since  these  Personal  accounts  are  usually  grouped  together  in  the  ledger, 
this  method  will  be  followed  in  this  text. 

Accounts  payable  are  the  Personal  accounts  that  show  the  amounts  owed  by  the  business. 
As  a  rule  these  accounts  also  are  grouped  together  in  the  ledger. 

Cash. 

William  H.  Brown,  Capital. 

]\Ierchandise  Purchases. 

Merchandise  Sales. 

General  Expense. 

Omit  one  page. 

William  French  &  Co.,  3G8  North  15th  St.,  City. 

E.  W.  Jones,  249  Union  Ave.,  City. 

T.  C.  Miller,  3G2  Walnut  St.,  City. 

T.  :M.  Rice  tfe  Co.,  820  Marshall  St.,  City. 

C.  J.  Thomas,  321  Main  St.,  City. 

John  J.  Hill,  721  St.  Clair  St.,  City. 

J.  G.  Keller,  1G2  East  Stenton  Ave.,  City. 

Omit  one  page. 

(88) 


BOOKKEEPING  WITHOUT  BUSINESS  PAPERS 


89 


James  T.  Hart,  316  Cherry  St.,  City. 
H.  H.  Hall,  210  Light  St.,  City. 
Walter  T.  Scott,  129  Front  St.,  City. 
E.  M.  Grace,  229  Front  St.,  City. 


No.  1. — September  1.  William  H.  Brown  has  this  day  invested  $3,000.00  in  the  flour  and 
grain  business  at  834  Green  St.,  your  city. 

Comment:  On  beginning  a  business,  a  record  is  usually  made  in  the  journal,  in  which  is 
recorded  the  name  of  the  proprietor,  the  kind  of  business  engaged  in,  the  place  where  the 
business  is  to  be  conducted,  and  the  amount  of  the  proprietor's  investment  as  shown  in  the 
following  illustration. 

Illustration  66 


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While  full  particulars  should  always  be  given  in  the  journal  regarding  the  establishment 
of  the  business  the  entry  for  the  cash  invested  in  the  business  is  made  in  the  cashbook. 

Make  an  entry  on  the  debit  or  cash  receipts  side  of  the  cashbook  for  the  $3,000.00  like  the 
following  illustration. 


lUustration  67 


Cash  Receipts 


ACCOintT  CREDITED 


EXPLANATION 


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Comment:  This  record  of  Mr.  Brown's  investment  in  the  business  should  be  kept  entirely 
distinct  from  his  personal  affairs.  The  transactions  which  you  will  record  in  this  set  will  be 
made  for  the  business  and  not  for  Mr.  Brown  personally. 

No.  2.— September  1.  Mr.  Brown,  the  proprietor,  has  rented  the  store  building  at  834 
Green  St.,  from  the  City  Real  Estate  Co.,  at  a  yearly  rental  of  $600.00.  He  has  paid  the 
rent  for  September  in  cash,  $50.00. 


90 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Comment:  Mr.  Brown  has  leased  the  store  building  for  one  year  for  the  business,  agreeing 
to  pay  the  rental  monthly  in  advance.  He  has,  in  effect,  paid  out  $50.00  of  the  original  cash 
investment  of  S3.000.00,  and  with  it  has  purchased  the  use  of  the  building  for  one  month. 

Make  an  entry  on  the  credit  or  cash  payment  side  of  the  cashbook  for  the  S50.00  like 
the  following  illustration. 

Cash  Payments 

Illustration  68 


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EXPU  NATION 


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No.  3.— September  2.  Bought  of  Hoskins  &  Co.,  books  and  stationery  for  office  use, 
for  which  Mr.  Brown  paid  cash,  .S17.50. 

Instructions :  Record  this  transaction  on  the  cash  payment  side  of  the  cashbook.  Place 
the  entry  directly  beneath  the  transaction  for  September  1st  which  is  the  record  for  the  cash 
payment  of  rent.  Do  not  rewrite  or  place  ditto  marks  in  the  space  set  apart  for  the  name  of 
the  month.  Place  2  in  the  second  space  of  the  date  column.  Your  record  or  entry  is  hke 
the  following  illustration. 

Cash  Payments 

Illustration  69 


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ACCOQNT  DEBITED 


EXPLANAnON 


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No.  4.— September  2.  Bought  of  James  T.  Hart,  316  Cherry  St.,  City,  on  account, 
275  bu.  corn  at  $1.41  per  bu.,  2G0  bu.  oats  at  G8^  per  bu.,  167  bu.  rye  at  $1.18  per  bu.:  total, 
$761.61. 

Comment :  Merchandise,  we  remember,  is  a  general  term  given  to  any  commodity  which 
is  bought  for  the  purpose  of  selling. 

The  expression  on  account  (abbreviated  on  a  c)  in  this  transaction  indicates  that  the 
purchase  was  made  without  any  definite  time  of  payment  specified,  the  time  of  pajinent 
depending  generally  upon  the  custom  of  the  particular  business.  Purchases  made  on  account 
arc  usually  tlue  and  payable  on  the  first  of  the  following  month. 

Each  purchases  journal  entry  has  a  double  effect,  just  as  each  cashbook  entry  has.  An 
entry  in  the  purchases  journal  is  a  debit  to  tiic  Merchandise  Purchases  account  and  a  credit 
to  tlu;  account  named  i)ecause  it  represents  the  value  of  the  merchandise  which  the  business 
has  received,  and  at  the  same  time  it  represents  value  which  H.  H.  Hall  has  given  to  the 
business. 


BOOKKEEPING  WITHOUT  BUSINESS  PAPERS 


91 


The  invoices  of  merchandise  purchased  will  be  numbered  consecutively  as  they  are 
received  by  the  business.  As  this  is  the  first  purchase  of  merchandise  by  the  business,  it  is 
numbered  1. 

Make  an  entry  in  the  purchases  journal  for  the  purchase  of  merchandise  from  James  T. 
Hart  like  the  following  illustration. 


Purchases  Journal 


Illustration  70 


DATE 

L.F 

ACCOUNT  CREDITED 

ADDRESS 

TERMS 

INV. 
NO. 

MDSE.  PUR- 
CHASES DR. 

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J 

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J/4  (..^^■£-4.''t.'^i^'<iZ^C,t>^^    (^-T-W^^ 

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7^/ 

i,/ 

No.  5.— September  2.  Bought  of  H.  H.  Hall,  210  Light  St.,  City,  on  account  at  30 
days,  21  bbl.  flour  at  SIO.IO  per  bbl,  278  bu.  wheat  at  $1.65  per  bu.:   total,S670.80. 

Comment:  The  expression  on  account  at  30  days  (abbreviated  a  c  30  days)  means 
that  the  invoice  of  merchandise  is  due  30  days  from  the  date  the  merchandise  was  invoiced. 

This  transaction  is  similar  to  the  preceding  one  with  James  T.  Hart.  The  entry  for  this 
purchase  of  merchandise  should  be  made  in  the  purchases  journal  directly  beneath  Mr. Hart's 
entry. 

No.  6.— September  3.  Sold  William  French  &  Co.,  368  North  15th  St.,  City,  on  account, 
74  bu.  corn  at  $1.50  per  bu.,  43  bu.  oats  at  75?5  per  bu.,  82  bu.  rye  at  $1.25  per  bu.:  total, 


Make  a  record  for  this  sale  to  WilHam  French  &  Co.,  in  the  sales  journal  like  the  follow- 
ing illustration. 

Sales  Journal 


Illustratioii  71 


ACCOUNT  DEBITED 


lALES 
HO. 


BIDSE. 
SAUSCR. 


J/ 


:g^/Zr/s- 


Z^SiJk,^^ 


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Comment:  Each  sales  journal  entry  has  a  double  effect,  just  as  each  purchases  journal 
entry  has  a  double  effect.  An  entry  in  the  sales  journal  is  a  credit  to  the  Merchandise  Sales 
account  and  a  debit  to  the  account  named  because  it  represents  the  value  of  the  merchan- 
dise which  the  business  has  given  out,  and  at  the  same  time  it  represents  value  which  WilHam 
French  &  Co.  have  received  from  the  business. 

The  merchandise  in  this  transaction  was  sold  to  William  French  &  Co.,  who  have  given  the 
business  their  promise  to  pay  for  the  merchandise  at  some  future  time.  Since  William  French 
&  Co.  have  received  value  from  the  business,  their  account  is  debited  for  the  amount  of  the 
sale,  $245.75. 


92 


BOOKKEEPIXG  FOR   MODERN  BTWXESS 


Posting. — At  such  time  as  may  bo  convoniont,  tho  bookkeeper  transfers  the  items  from 
the  purchases  journal,  the  sales  journal,  the  journal,  and  the  cashbook  to  their  proper  ledger 
accounts.  In  posting,  the  utmost  care  should  be  exercised  that  all  debit  items  shall  be  carried 
to  the  debit  side  of  the  proper  ledger  account,  and  that  all  credit  items  shall  be  carried  to  the 
credit  side  of  the  proper  ledger  account. 

Order  of  Posting. — When  transactions  are  being  recorded  in  the  purchases  journal,  the 
sales  journal,  tiie  journal,  and  the  cashbook,  the  following  order  of  posting  is  suggested:  the 
purchases  journal,  the  sales  journal,  the  journal,  the  cash  receipts  side  of  the  cashbook,  and  the 
cash  pa>Tiients  side  of  the  cashbook.  When  this  ordc.'r  of  posting  is  followed,  credits  are  not 
entered  in  a  customer's  account  before  the  debits  are  posted;  and  debits  are  not  entered  in  a 
creditor's  account  before  the  credits  are  entered. 

In  posting  from  the  purchases  journal,  all  items  entered  in  the  Account  Credited  column 
are  posted  to  the  credit  side  of  their  respective  accounts.  An  entr^-  in  the  Accoimt  Credited 
column  of  the  purchases  journal  indicates  that  the  Alerchandise  Purchases  account  is  to  be 
debited  and  the  account  named  is  to  be  credited.  You  will  now  transfer  the  $761.61  which 
is  the  record  for  the  purchase  of  merchandise  from  James  T.  Hart  to  the  credit  side  of  James 
T.  Hart's  account  in  the  ledger  making  the  entry  in  the  following  order: 

First,  write  $761.61  in  the  amount  column;  second,  place  the  page  of  the  purchases 
journal  1  from  which  the  entry  is  posted,  in  the  folio  column,  and  P  (abbreviation  for  purchases 
journal)  just  to  the  left  of  the  folio  column  to  indicate  the  original  book  from  which  the  entry 
is  posted;  third,  write  on  a/c  in  the  explanation  column;  fourth,  write  Sept.  2  in  the  date 
column,  placing  the  current  year  above  the  first  entry  to  indicate  the  year. 

Your  entry  should  be  like  the  following  illustration. 

Illustration  72 


3/6 


Postmarking  the  Entries. — Next,  write  5,  the  page  of  the  ledger  to  which  the  amount 
has  been  posted,  in  the  folio  column  (abbreviated  L.  F.)  of  the  purchases  journal.  The 
following  illustrates  the  form  of  the  entry: 


Purchases  Journal 


Illustration  73 


DATS 

L.F. 

ACCOTmT  CREDITED 

ADDRESS 

TERMS 

mv. 

IfO. 

MDSE.  PUR- 
CHASES DR. 

2 

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J/(aC^A^^i^i.'^<i^^if..^i^^ 

■,c>->^'^c 

/ 

y6/ 

C/ 

BOOKKEEPING   WITHOUT  BUSINESS  PAPERS 


93 


When  posting  always  write  in  the  foho  column  of  the  ledger  the  page  of  the  purchases 
journal  from  which  the  amount  is  posted,  and  write  in  the  folio  column  of  the  purchases  journal 
the  page  of  the  ledger  to  which  it  is  posted.     This  operotioti  is  knoum  as  postmarking. 

You  will  also  transfer  the  $670.80  which  is  the  record  for  the  purchase  of  merchandise  from 
H.  H.  Hall  to  the  credit  side  of  H.  H.  Hall's  account  in  the  ledger,  making  the  entry  in  the 
exact  order  as  previousl}^  instructed  in  James  T.  Hart's  account.  Postmark  the  entries. 
The  Merchandise  Purchases  account  is  debited  with  the  total  amount  of  the  purchases  when 
the  purchases  journal  is  closed  at  the  end  of  the  month. 

In  posting  from  the  sales  journal,  all  items  entered  in  the  Account  Debited  column  are 
posted  to  the  debit  side  of  their  respective  accounts.  An  entry  in  the  Account  Debited  column 
of  the  sales  journal  indicates  that  the  account  named  is  to  be  debited  and  the  INIerchandise 
Sales  account  is  to  be  credited.  You  will  now  transfer  the  S245.75  which  is  the  record  for  the 
sale  of  merchandise  to  William  French  &  Co.  to  the  debit  side  of  William  French  &  Co.'s 
account  in  the  ledger.     Post  the  entry  in  the  exact  order  given  below. 

First,  write  8245.75  in  the  amount  column;  second,  place  the  page  of  the  sales  journal 
1  from  which  the  entry  is  posted  in  the  folio  column,  and  aS  (abbreviation  for  sales  journal) 
just  to  the  left  of  the  folio  column  to  indicate  the  original  book  from  which  the  entry  is  posted; 
third,  write  on  a/c  in  the  explanation  column;  fourth,  write  Sept.  3  in  the  date  column,  placing 
the  current  year  above  the  first  entry  to  indicate  the  year.  Next,  write  4,  the  page  of  the 
ledger  to  which  the  amount  has  been  posted,  in  the  folio  column  of  the  sales  journal. 

Your  entry  should  be  like  the  following  illustration. 


Illustration  74 


^-7^1^ '^/yLs-T^t^zy  'kL^L 


7r 


J<ir^.  /s^>^ 


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J 


^ 


Cy>7^z^  ^y^y 


J 


2V^ 


7-3 


In  posting  from  the  cashbook,  all  items  entered  in  the  Account  Credited  column  on  the  cash 
receipts  side  are  posted  to  the  credit  side  of  their  respective  accounts.  An  entry  on  the  cash 
receipts  side  of  the  cashbook  indicates  that  the  Cash  account  is  to  be  debited  and  the  account 
named  is  to  be  credited.  You  will  now  transfer  the  $3,000.00  investment  from  the  cash 
receipts  side  of  the  cashbook  to  the  credit  side  of  William  H.  Brown's  Capital  account  in  the 
ledger,  making  the  entry  in  the  following  order: 

First,  write  83,000.00  in  the  amount  column;  second,  place  the  page  of  the  cashbook 
2  from  which  the  entry  is  posted  in  the  folio  column,  and  C  (abbreviation  for  cashbook)  just 
to  the  left  of  the  folio  column  to  indicate  the  original  book  from  which  the  entry  is  posted; 
third,  write  Investment  in  the  explanation  column;  fourth,  write  Sept.  1  in  the  date  column, 
placing  the  current  year  above  the  first  entry  to  indicate  the  year.  Be  sure  to  postmark  your 
entries. 

Your  entry  should  be  like  the  following  illustration. 


94 

Illustration  75 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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^^ 


^^Jn'Ui^AJ^^f^^^yt^ 


2 :     JOOdf  0(P 


In  posting  from  the  cashbook,  all  items  entered  in  the  Account  Debited  column  on  the 
cash  payments  side  are  posted  to  the  debit  side  of  their  respective  accounts.  An  entry  on 
the  cash  payments  side  of  the  cashbook  indicates  that  the  Cash  account  is  to  be  credited  and 
the  account  named  is  to  be  debited.  You  will  now  transfer  the  S50.00  which  is  the  record  for 
the  cash  payment  of  rent  from  the  cash  payments  side  of  the  cashbook  to  the  debit  side  of  the 
General  Expense  account  in  the  ledger.  Post  the  entry  in  the  exact  order  given  in  the  previous 
transaction  with  William  H.  Brown,  Capital.  Next,  write  2,  the  page  of  the  ledger  to  which 
the  amount  has  been  posted,  in  the  folio  column  of  the  cashbook. 

You  will  also  transfer  the  $17.50  which  is  the  record  for  the  cash  payment  for  books  and 
stationery  from  the  cash  payments  side  of  the  cashbook  to  the  debit  side  of  the  General  Expense 
account  in  the  ledger.  This  is  the  second  transaction  affecting  the  General  Expense  account. 
A  new  account  with  General  Expense  is  not  opened  in  the  ledger,  but  the  entry  is  made  directly 
beneath  the  entry  for  the  cash  payment  of  rent.  Do  not  rewrite,  or  place  ditto  marks  in 
the  space  set  apart  for  the  name  of  the  month.  Place  2  in  the  second  space  of  the  date  column. 
Post  the  entry  in  the  exact  order  given  in  the  previous  transactions.  Postmark  your  entries. 
Your  entry  should  be  hkc  the  following  illustration. 

Illustration  76 


>&^^^yi£yli^lJy  0-^;i:^^2.e-7^ui^y 


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Sd    00 


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so 


Questions:  1.  Give  the  functions  of  the  Cnsh  account.  2.  What  does  the  term  cn^h 
include?  '.^.  A\'hat  does  the  Proprietor's  Capital  account  show?  4.  What  is  posting? 
Answer:  The  process  of  ti-ansferring  an  amount  from  a  book  of  original  entry  to  the  proper 
account  in  the  ledger.  5.  What  is  postmarking?  6.  What  is  an  expense?  7.  Give  the 
general  classification  of  expense  items.  8.  With  what  items  is  the  General  Expense  account 
debited?  The  Selling  Expense  account?  9.  What  is  meant  In'  the  term  nurchnndisc? 
10.  CJivc  the  functions  of  the  Merchandise  Purchases  account?  11.  With  what  items  is  the 
Merchandise  Purchases  account  debited?  12.  What  are  Personal  accounts?  13.  Give  the 
rules  for  delnting  and  crediting  Personal  accounts.  14.  What  does  the  expression  on  account 
mean?  On  account  at  10  daijs?  J, 5.  What  does  the  abbi-eviation  C  in  a  hHJger  account  mean? 
P?  »S'?  Hi.  (Jive  tiie  functions  of  the  Merciiandise  Sales  account?  17.  With  what  items  is 
the  Merchandise  Sales  account  credited?  18.  Define  Assets,  Liabilities,  Debtors,  Creditors, 
Accounts  lleceivable,  and  Accounts  Payable.  19.  Give  the  reason  for  each  debit  and  each 
credit  entry  in  the  six  transactions  just  recorded. 


BOOKKEEPING  WITHOUT  BUSINESS  PAPERS  95 

No.  7. — September  4.  Sold  to  E.  W.  Jones,  249  Union  Ave.,  City,  on  account  at  30 
days,  4  bbl.  flour  at  $10.90  per  bbl.,  73  bu.  wheat  at  SI. 75  per  bu.:   total,S . 

Comment:  This  transaction  is  similar  to  the  preceding  one  with  William  French  &  Co. 
The  record  for  this  sale  should  be  made  in  the  sales  journal  directly  beneath  the  one  made  for 
William  French  &  Co. 

No,  8.— September  5.  Sold  to  T.  C.  Miller,  363  Walnut  St.,  City,  on  account,  45  bu. 
wheat  at  $1.75  per  bu.,  96  bu.  corn  at  $1.50  per  bu.:    total, $ . 

No.  9. — September  5.  Mr.  Brown  has  paid  James  T.  Hart,  in  full  for  the  invoice  of 
merchandise  bought  on  the  2d,  S761.61. 

Comment:  On  September  2d,  the  business  purchased  merchandise  from  James  T.  Hart, 
on  account,  agreeing  to  pay  for  the  goods  within  a  reasonable  time.  A  record  for  this  was 
made  in  the  purchases  journal  and  the  amount,  $761.61,  was  posted  to  the  credit  side  of  Mr. 
Hart's  account  in  the  ledger.  Mr.  Hart's  account  in  the  ledger  was  credited  because  the 
business  owed  him  for  the  value  of  the  merchandise.  The  business  has  now  paid  its  indebted- 
ness to  Mr.  Hart  in  cash.  James  T.  Hart's  account,  therefore,  should  be  debited  because  Mr. 
Hart  has  received  value  from  the  business. 

Turn  to  James  T.  Hart's  account  in  the  ledger  and  verify  the  amount  paid  out,  $761.61, 
with  his  ledger  account  before  making  the  entry  for  the  cash  payment  in  your  cashbook.  It 
is  very  essential  that  from  the  beginning  you  should  be  methodical  in  all  your  bookkeeping 
work.  The  accurate  and  careful  bookkeeper  will  alwaj^s  turn  to  the  ledger  account"  to  see  if 
the  amount  of  cash  received  or  paid  out  is  correct. 

Instructions:  Make  an  entry  for  the  cash  paid  to  James  T.  Hart  on  the  cash  pay- 
ments side  of  the  cashbook  as  follows:  First,  place  8761.61  in  the  amount  column;  second, 
James  T.  Hart  in  the  account  debited  column;  third,  write  5  in  the  date  column;  fourth, 
inv.  9/2  (abbreviation  for  September  2d)  in  the  explanation  column. 

No.  10. — September  6.  Wilham  French  &  Co.  have  paid  cash  for  the  bill  of  merchandise 
sold  them  on  the  3d. 

Comment:  On  September  3d,  the  business  sold  merchandise  to  William  French  &  Co. 
on  account.  A  record  for  this  sale  was  made  in  the  sales  journal  and  the  amount,  $245.75, 
was  posted  to  the  debit  side  of  then-  account  in  the  ledger.  William  French  &  Co.'s  account- 
in  the  ledger  was  debited  because  they  received  value,  merchandise,  from  the  business  and  thus 
became  indebted  to  the  business. 

WiUiam  French  &  Co.  have  now  paid  their  indebtedness  to  the  business  in  cash.  Their 
account,  therefore,  should  be  credited  because  they  have  given  value  to  the  business. 

Before  making  the  entrj^  for  the  cash  received  from  WlUiam  French  &  Co.  in  your  cash- 
book,  turn  to  their  account  in  the  ledger  and  verify  the  amount  received,  $245.75,  with  their 
ledger  account.  If  j'our  work  is  correct,  you  wiU  find  that  their  account  was  debited  for 
$245.75  on  the  3d.  Always  verify  the  amount  of  cash  received  or  paid  out  with  the  proper 
ledger  account. 

Instructions:  Make  an  entry  for  the  cash  received  from  William  French  &  Co.  on  the 
cash  receipts  side  of  the  cashbook  as  follows:  First,  place  8345.75  in  the  amount  column; 
second,  William  French  &  Co.  in  the  account  credited  column;  third,  6,  the  date  of  the 
transaction,  in  the  date  column:   fourth,  bill  9/3  in  the  explanation  column. 


96  BOOKKEEPIXG  FOR  MODERN  BUSINESS 

No.  11.— September  8.  Bought  of  Walter  T.  Scott,  129  Front  St.,  City,  on  account,  10 
bbl.  Hour  at  SIO.IO  per  bbl.,  213  bu.  rye  at  $1.18  per  bu.:   total,  S352.34. 

No.  12. — September  9.  Sold  to  J.  G.  Keller,  162  East  Stenton  Ave.,  City,  on  account  at 
30  days,  57  bu.  wheat  at  $1.75  per  bu.,  48  bu.  corn  at  $1.50  per  bu.:   total,  $ . 

No.  13. — September  10.  Sold  to  William  French  ct  Co.,  on  account,  97  bu.  rye  at  $1.25 
per  l)u.,  4G  bu.  wheat  at  $1.75  per  bu.:    total,  $ . 

No.  14. — September  11.  Received  from  T.  C.  ]\Iiller  $75.00  to  apply  on  account  of  bill 
of  jgoods  sold  him  on  the  5th. 

Comment:  Turn  to  the  sales  journal  and  determine  the  amount  which  Mr.  Miller  owes 
the  business  since  the  amount  of  this  sale  has  not  been  posted  to  his  ledger  account.  You  w^ill 
see  that  the  amount  of  cash  received,  $75.00,  is  only  a  part  of  his  indebtedness  to  the  business. 
The  bill  of  merchandise  sold  to  Mr.  Miller  on  the  5th  amounted  to  $222.75,  therefore,  he 
will  still  owe  the  balance.  When  making  your  entrj-  in  the  cashbook,  write  to  apply  on  bill 
9^  5  in  the  explanation  column. 

No.  15. — September  11.  Paid  Walter  T.  Scott  $150.00  to  apply  on  account  of  invoice 
bought  from  him  on  the  8th. 

Comment:  Turn  to  the  purchases  journal  and  determine  the  amount  which  the  business 
owes  Walter  T.  Scott  since  the  amount  of  this  purchase  has  not  been  posted  to  his  ledger 
account.  You  will  find  that  the  cash  paid  out  is  only  a  part  of  the  amount  owed  to  Mr.  Scott. 
The  invoice  of  merchandise  bought  from  Walter  T.  Scott  on  the  8th  amounted  to  $352.34, 
therefore,  the  business  will  still  be  indebted  to  him  for  the  balance.  AMien  making  your  entrj^ 
in  the  cashbook  write  to  apply  on  inv.  9/8  in  the  explanation  column. 

No.  16. — September  12.  Purchased  from  James  T.  Hart,  on  account,  120  bu.  wheat  at 
$1.65  per  bu.,  210  bu.  corn  at  $1.41  per  bu.:     total,  $494.10. 

No.  17. — September  13.  Purchased  from  E.  M.  Grace,  229  Front  St.,  City,  on  account, 
210  bu.  oats  at  68^  per  bu.,  200  bu.  corn  at  $1.41  per  bu.:    total,  .$424.80. 

No.  18.— September  15.  Sold  to  T.  M.  Rice  &  Co.,  820  Marshall  St.,  City,  on  account 
at  20  days,  82  bu.  corn  at  $1.50  per  bu.,  15  bbl.  flour  at  $10.90  per  b])l. :    total,  .$ . 

Posting. — Post  the  transactions  from  3  our  purchases  journal,  sales  journal,  and  cashbook. 
For  explanation  of  posting,  see  pages  92  and  93.  Post  the  purchases  journal  and  sales  journal 
first,  then  the  cashbook. 

Ruling  Personal  Accounts. — "WTien  an  account  has  the  same  amount  on  both  the  debit 
and  credit  sides,  the  account  is  said  to  balance,  and  is  ready  to  be  ruled.  Rule  ])oth  William 
French  &  Co.'s  and  James  T.  Hart's  accounts  in  the  ledger  after  you  liave  posted  the  items  to 
their  accounts  from  the  cashbook.     For  explanation  of  itiling,  see  page  19. 

Questions:  1.  Uefine  posting.  When  should  posting  l)e  done?  2.  When  is  an  account 
said  to  balance?  3.  How  are  personal  accounts  ruled  when  the  debit  and  credit  sides  are 
equal?  4.  Turn  to  James  T.  Hart's  account  in  your  ledger.  Was  this  account  opened  with 
Mr.  Hart  as  a  debtor  or  as  a  creditor?  Explain  fully.  5.  Turn  to  William  French  &  Co.'s 
account  in  your  ledger.  Was  this  account  opened  with  William  French  <fe  Co.  as  a  debtor  or 
as  a  creditor?  Explain  fully.  6.  Give  the  reason  for  each  debit  and  (vich  credit  entry  in  the 
eleven  transactions  just  recoided.  Turn  to  your  ledger  and  name  llie  jiersons  or  firms  from 
wiioMi  the  proprietor  bought  niereliandise.and  the  personsor  firms  to  whom  he  sold  merchandise. 


BOOKKEEPING  WITHOUT  BUSINESS  PAPERS  97 

No.  19.— September  16.     Received  from  T.  C.  Miller  S147.75  to  pay  the  balance  of  his 

bill  of  the  5th. 

Comment:  Turn  to  T.  C.  Miller's  account  in  the  ledger  and  determine  the  amount  which 
he  owes  the  business.  The  bill  of  merchandise  sold  to  Mr.  Miller  on  the  5th  amounted  to 
$222.75.  Mr.  Miller's  account  was  credited  with  $75.00  on  the  11th.  The  balance,  therefore, 
which  he  still  owes  is  $147.75.  When  making  your  record  in  the  cashbook  write  in  full, 
bill  9/5  in  the  explanation  column. 

No.  20.— September  16.  Sold  to  C.  J.  Thomas,  321  Main  St.,  City,  on  account,  56  bu. 
rye  at  S1.25  per  bu.,  L37  bu.  oats  at  75^  per  bu.:    total,  $ . 

No.  21.— September  17.  Sold  to  John  J.  Hill,  721  St.  Clair  Ave.,  City,  on  account,  150 
bu.  oats  at  75^  per  bu.:   total, $ • 

No.  22.— September  18.  Bought  of  Walter  T.  Scott,  on  account,  30  bbl.  flour  at  $10.10 
per  bbl,  188  bu.  corn  at  $1.41  per  bu.:    total,  $568.08. 

No.  23.— September  19.  Paid  James  T.  Hart  $50.00  to  apply  on  account  of  invoice 
purchased  on  the  12th. 

No.  24.— September  20.     Received  cash  from  E.  W.  Jones  in  full  for  bill  sold  him  on  the 

4th,  $171.35. 

No.  25.— September  22.  Sold  to  E.W.Jones,  on  account  at  15  days,  85  bu.  corn  at  $1.50 
per  bu.,  20  bbl.  flour  at  $10.90  per  bbl.:     total, $ — . 

No.  26.— September  23.  Sold  to  T.  C.  Miller,  on  account, -57  bu.  wheat  at  $1.75  per  bu., 
140  bu.  oats  at  75^  per  bu. :    total,  $ . 

No.  27.— September  24.     Paid  E.  M.  Grace  $100.00  to  apply  on  account. 

No.  28.— September  25.     Paid  Walter  T.  Scott  the  balance  of  the  invoice  purchased  on 

the  8th,  $202.34. 

No.  29.— September  25.     Received  from  J.  G.  Keller  $171.75  in  full  for  bill  sold  him  on 

the  9th. 

Posting.— Post  the  transactions  from  your  purchases  journal,  sales  journal,  and  cashbook. 
Post  the  purchases  journal  and  sales  journal  first,  then  the  cashbook.  Rule  out  all  balancmg 
items  in  the  personal  accounts  when  the  balancing  items  are  posted. 

Questions:  1.  When  should  the  posting  be  done?  2.  Give  the  reason  for  each  debit 
and  each  credit  entry  in  the  eleven  transactions  just  recorded.  _  3.  When  the  debit  side  ot 
a  personal  account  is  the  larger,  what  does  it  show?    The  credit  side? 

No.  30.— September  26.     Paid  H.  H.  Hall  cash  for  invoice  bought  from  him  on  the  2d. 

Comment:  Determine  the  amount  of  cash  to  be  paid  by  referring  to  H.  H.  Hall's  account 
in  the  ledger. 

No.  31.— September  27.     Sold  to  John  J.  Hill  for  cash,  22  bbl.  flour  at  $10.90  per  bbl.: 

total,  $ 

Comment:  John  J.  Hill  is  a  regular  customer  of  the  business  who  usually  buys  merchan- 
dise on  account  but  in  this  transaction  he  has  paid  cash.  A  record  for  the  sale  should  be  made 
in  the  sales  journal.  All  sales  of  merchandise  are  entered  in  the  sales  journal  regardless  of  the 
terms  in  this  set,  and  their  amounts  are  posted  to  the  proper  ledger  accounts. 

Since  Mr.  Hill  paid  $239.80,  the  amount  of  the  sale,  when  the  merchandise  was  ordered, 
a  record  for  this  amount  is  entered  in  the  cashbook. 


98  BOOKKEEPING  FOR  MODERN  BUSINESS 

Two  separate  original  entries  are  made  when  merchandise  is  sold  for  cash.  A  record  of 
the  sale  is  made  in  the  sales  journal  and  a  record  for  the  cash  received  is  made  in  the  cashbook. 
Mr.  Hill's  account  will,  therefore,  be  debited  when  the  S239.80  is  posted  from  the  sales  journal 
to  his  ledger  account,  and  his  account  will  be  credited  as  well  when  the  S239.80  is  posted  from 
the  cashbook  to  his  account. 

No.  32.— September  27.  Received  from  John  J.  Hill  8112.50  to  pay  for  the  bill  of 
merchandise  sold  him  on  the  17th. 

No.  33.— September  29.  Sold  to  J.  G.  Keller,  on  account,  96  bu.  rye  atSl.25  per  bu., 
80  bu.  wheat  at  SI. 75  per  bu.:    total,  S . 

No.  34.— September  29.  Received  from  William  French  &  Co.  $75.00  to  apply  on 
account. 

No.  35.— September  30.     Received  from  T.  M.  Rice  &  Co.  S125.00  to  apply  on  account. 

No.  36.— September  30.     Paid  James  T.  Hart  $75.00  to  apply  on  invoice  of  the  12th. 

No.  37.— September  30.  ^Mr.  Brown  pays  you  S70.00,  the  amount  of  your  salary  for  the 
month  of  September. 

Posting. — Post  the  transactions  from  your  purchases  journal,  sales  journal,  and  cashbook. 
Post  the  purchases  journal  and  sales  journal  first,  then  the  cashbook.  Rule  out  all  balancing 
items  in  the  personal  accounts  when  the  balancing  items  are  posted. 

Closing  the  Purchases  Journal.— The  sum  of  all  the  merchandise  purchases  recorded 
during  the  month  should  be  $3,271.73.  If  you  find  your  work  to  be  correct,  close  the  purchases 
journal  as  previously  shown  in  Illustration  55. 

Post  the  total  amount  of  the  merchandise  purchases  made  diu-ing  the  month  to  the  debit 
side  of  the  Merchandise  Purchases  account.  Next,  place  1,  the  page  of  the  ledger,  in  the 
folio  column  of  the  purchases  journal,  and  1,  the  page  of  the  purchases  journal,  in  the  foUo 
column  of  the  ^Icrchandisc  Purchases  account  in  the  ledger. 

Instructions  for  Checking  the  Purchases  Journal. — The  careful  bookkeeper,  in  order  to 
detect  an\  en-or  in  posting,  checks  each  item  from  the  purchases  journal  to  the  ledger  after  it 
has  been  posted.  A  bookkeeper  in  posting  is  likely  to  make  such  errors  as  $236.00  for  $263.00; 
$1.25  for  $125.00;  or  post  an  amount  to  the  wrong  account. 

You  were  instructed  to  post  each  transaction  during  the  month  to  the  credit  side  of  the 
person's  account  from  whom  you  purchased  merchandise.  As  you  have  completed  the  post- 
ing for  the  month  of  September,  check  your  entire  purchases  journal  to  the  ledger. 

Compare  the  items  posted  from  the  purchases  journal  with  the  items  entered  in  the  ledger 
accounts  as  follows:  Beginning  with  the  first  record  in  the  purchases  journal,  turn  to  James 
T.  Hart's  account  in  the  ledger  and  carefully  inspect  the  posting  as  follows:  First,  that  the 
correct  amount  has  been  posted  to  the  credit  side  of  his  account;  second,  that  the  date  agrees 
with  the  date  given  in  the  purchases  journal,  and,  if  it  bo  the  first  entry  in  the  account,  that 
the  year  is  entered  above  the  month ;  third,  that  the  folio  page  number  of  ihv  purchases  joinnal 
in  the  ledger  is  correct  and  the  folio  page  number  of  \hv  ledger  in  the  purchases  journal  is 
correct.  Place  a  light  pencil  check  mark,  thus  (V),  on  the  double  vertical  lines  to  the  left 
of  the  amount  in  the  ledger  account  and  check  the  record  in  the  purchases  journal,  thus  (V), 
(Ml  the  doubk-  vertical  liucb  to  the  left  of  the  amount  as  shown  in  the  following  illustrations. 


BOOKKEEPING   WITHOUT  BUSINESS  PAPERS 
Purchases  Journal 


99 


Illustration  77 


DATE 

L.F. 

ACCOONT  CREDITED 

ADDRESS 

TERMS 

INV. 
NO. 

HOSE.  PUR- 
CHASES DR. 

^9 

2 

X^^^^j^K^i^cX  i^^^ 

?/^  L..^AeA^i^v^^<^X<^,'i^^ 

C'-T^t^''''^ 

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Illustration  78 


3/6 


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C 
C 

c 


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sc 
^H- 


Ll. 


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C/L 


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Check  all  the  entries  in  the  purchases  journal  to  the  ledger  following  the  same  method  for 
each  of  the  entries.  If  the  checking  is  done  systematically,  you  will  detect  any  errors  which 
might  have  been  made  in  posting.  This  process  of  checking  requires  a  httle  extra  time,  but  it 
prevents  many  errors  in  the  work  that  is  to  follow. 

Some  bookkeepers  prefer  to  use  the  dot  (.)  as  a  check  mark.  Since  the  check  mark,  thus 
(V),  can  be  made  more  distinct  and  with  greater  speed  it  is  recommended  in  this  text.  In 
case  rechecking  becomes  necessary  both  the  dot  and  the  check  may  be  used  conveniently. 

Theory  of  Debits  and  Credits. — You  have  observed  from  the  above  postings  and  checkings 
that  the  sum  of  all  pm'chases  posted  to  the  debit  side  of  the  Merchandise  Purchases  account 
equals  the  sirni  of  the  individual  amounts  which  have  been  posted  to  the  credit  side  of  the 
various  personal  accounts.     The  following  illustration  will  show  this  more  clearly. 


DEBITS 

CREDITS 

Merchandise 

I 
Purchases 

$3,271 

73 

James  T.   Hart 
H.    H.   Hall 
Walter  T.    Scott 
James  T.   Hart 
E.   M.    Grace 
Walter  T.   Scott 

Total 

$761 
670 
352 
494 
424 
568 

61 
80 
34 
10 
80 
08 

$3,271 

73 

$3,271 

73 

100 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Comment:  The  Merchandise  Purchases  account  in  the  ledger  has  been  debited  for  the 
sum  of  all  the  purchases  (§3,271.73)  recorded  in  the  purchases  journal.  The  above  personal 
accounts  have  been  credited  in  the  ledger  for  tlie  individual  amounts  (totaling  .53,271.73) 
recorded  in  the  purchases  journal. 

From  the  above  illustration  it  is  evident  that  if  the  total  of  the  purchases  journal  and  the 
postings  are  correct,  the  total  amount  of  the  merchandise  purchased  posted  to  the  debit  side 
of  the  Merchandise  Purchases  account  in  the  ledger  must  ecjual  the  total  of  all  the  credits 
posted  from  the  purchasers  journal. 

Closing  the  Sales  Journal. — The  sum  of  all  sales  recorded  during  the  month  should  be 
.?2,635.15.  If  you  find  your  work  to  be  correct,  close  the  sales  journal  as  previously  shown  in 
Illustration  50. 

Post  the  total  amount  of  the  merchandise  sales  made  during  the  month  to  the  credit  side 
of  the  ^Merchandise  Sales  account  in  the  ledger.  Next,  place  1,  the  page  of  the  ledger,  in  the 
folio  colunm  of  the  sales  journal,  and  1,  the  page  of  the  sales  journal,  in  the  folio  column  of 
the  Merchandise  Sales  account  in  the  ledger. 

Instruction  for  Checking  the  Sales  Journal. — You  were  instructed  in  each  transaction 
during  the  month  involving  a  merchandise  sale,  to  post  its  value  to  the  de])it  side  of  the  per- 
son's account  to  whom  you  sold  the  merchandise.  Compare  the  items  posted  from  the  sales 
jom-nal  with  the  items  entered  in  the  ledger  in  the  same  manner  as  you  previously  have 
checked  the  purchases  journal.  Place  a  light  check  mark,  thus  (V),  on  the  double  vertical 
lines  to  the  left  of  the  amount  in  the  ledger  account,  and  then  check  the  record  in  the  sales 
journal,  thus  (V),  on  the  double  vertical  lines  to  the  left  of  the  amount  as  shown  in  the 
following  illustrations. 

Sales  Journal 


Illustration  79 


y^- 


J 


V 


ACCOUNT  DEBITED 


'$^^.:«««i.ix^.«k.**^^  (^  Uf  ^.  /j..^:^^^^^^ 


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MO. 


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MDSE. 
SALES  CR. 


3^3 


7~ 


Illustration  80 


'.'2^^yii&^7^i^c-Jz^  9^  ^Of 


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J. 


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Check  all  the  entries  in  the  sales  journal  to  the  ledger  following  the  same  instruction  given 
above.  This  process  of  checking  the  sales  journal  requires  a  little  extra  time,  but  it  prevents 
many  errors  in  the  work  that  is  to  follow. 


BOOKKEEPING   WITIIOVT   BUSINESS   PAPERS 


101 


Theory  of  Debits  and  Credits. — You  have  observed  from  the  foregoing  postings  and 
checkings  that  the  sum  of  all  the  merchandise  sales  posted  to  the  credit  side  of  the  Merchandise 
Sales  account  equals  the  sum  of  the  individual  amounts  which  have  been  posted  to  the  debit 
side  of  the  various  personal  accounts.     The  following  illustration  will  show  this  more  clearly. 


DEBITS 

CREDITS 

William  French  &  Co. 

$245 

75 

Merchandise  Sales 

$2,635 

15 

E.  W.  Jones 

171 

35 

T.  C.  Miller 

222 

75 

J.  G.  Keller 

171 

75 

William  French  &  Co. 

201 

75 

T.  M.  Rice  &  Co. 

286 

50 

C.  J.  Thomas 

172 

75 

John  J.  Hill 

112 

50 

E.  W.  Jones 

345 

50 

T.  C.  Miller 

204 

75 

John  J.  Hill 

239 

80 

J.  G.  Keller 

260 

00 

Total 

Total 

$2,635 

15 

$2,635 

15 

Comment:  The  Merchandise  Sales  account  in  the  ledger  has  been  credited  for  the  sum 
of  aU  sales  ($2,635.15)  recorded  in  the  sales  journal. 

The  above  personal  accounts  have  been  debited  in  the  ledger  for  the  individual  amounts 
(totahng  $2,635.15)  recorded  in  the  sales  journal. 

From  the  above  illustration  it  is  evident  that  if  the  total  of  the  sales  journal  and  the 
postings  are  correct,  the  total  of  all  debits  posted  from  the  sales  journal  must  equal  the  total 
amount  of  the  merchandise  sales  posted  to  the  credit  side  of  the  Merchandise  Sales  Account. 

Checking  and  Balancing  the  Cashbook. — The  sum  of  all  the  cash  receipts  recorded 
during  the  month  should  be  $4,363.90.  If  you  find  your  work  to  be  correct,  extend  the  amount 
into  the  right-hand  money  column,  as  previously  shown  in  Illustration  58. 

Post  the  total  amount  of  cash  received  during  the  month  to  the  debit  side  of  the  Cash 
account  in  the  ledger.  Next,  place  S,  the  page  of  the  ledger,  in  the  foho  column  of  the 
cashbook,  and  1,  the  page  of  the  cashbook  in  the  foho  column  of  the  Cash  account  in  the 
ledger. 

Instructions  for  Checking  the  Cash  Receipts. — You  may  now  check  your  postings  on  the 
cash  receipts  side  of  your  cashbook.  You  were  instructed,  in  each  transaction  during  the 
month  involving  a  cash  receipt,  to  post  its  value  to  the  credit  side  of  the  person's  account 
from  whom  the  cash  was  received.  Compare  the  items  posted  from  the  cash  receipts  side  of 
the  cashbook  with  the  items  entered  in  the  ledger  in  the  same  manner  as  you  previously  have 
checked  the  purchases  and  sales  journals.     Place  a  light  pencil  check  mark,  thus  (V),  on  the 


102 


BOOKKEEPING   FOR    MODERN  BUSINESS 


double  vertical  lines  just  to  the  left  of  the  amount  in  the  ledger,  and  tlicn  check  the  record 
on  the  cash  receipts  side  of  the  cashliook,  tlius  (V),  on  the  doul)lo  vertical  lines  just  to  the 
left  of  the  amount  as  shown  in  the  followine;  illustrations. 


Cash  Receipts 


Illustration  81 


ACCOUNT  CREDITED 


EXPLANATION 


JtS^^^ 


Illustration  82 


j^^^^C^tiZ^f^^\r^(^^i<::^t.t^^t^C^  v_<'>W-2'^,St^^^?^-.^<?^2^ 


SiPCO 


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^-^ 


TT'\ 


»=f^>^'«-S5c^5^«,S-»'t<^  O     ^    V 


j<p<:?o 


a<y 


Check  all  the  entries  on  the  cash  receipts  side  of  the  cashbook  to  the  ledger  following  the 
same  method  for  each  of  the  items. 

Theory  of  Debits  and  Credits. — You  have  observed  from  the  above  postings  and  checkings 
that  the  sum  of  all  the  cash  receipts,  posted  to  the  debit  side  of  the  Cash  account,  equals  the 
sum  of  the  individual  amounts  whichhave  been  posted  to  the  credit  side  of  the  various  accounts 
from  whom  the  cash  was  received.     The  following  illustration  will  show  this  more  clearly. 


DEBITS 


CREDITS 


Cash  Dr, 


Total 


$4,363 


$4,363 


90 


90 


William  H.  Brown 
William  French  &  Co 
T.  C.  Miller 
T.  C.  Miller 
E.  W.  Jones 
J.  G.  Keller 
John  J.  Hill 
John  J.  Hill 
William  French  &  Co 
T.  M.  Rice  &  Co. 

Total 


$3,000 

00 

245 

75 

75 

00 

147 

75 

171 

35 

171 

75 

239 

80 

112 

50 

75 

00 

125 

00 

$4,363 

90 

BOOKKEEPING   WITHOUT  BUSINESS  PAPERS 


103 


Comment:  The  Cash  account  in  the  ledger  has  been  debited  for  the  sum  of  all  cash 
receipts  ($4,363.90)  recorded  on  the  cash  receipts  side  of  the  cashbook. 

The  above  Personal  accounts  have  been  credited  in  the  ledger  for  the  individual  amounts 
(totaling  $4,303.90)  recorded  on  the  cash  receipts  side  of  the  cashbook. 

From  the  above  illustration  it  is  evident  that  if  the  total  of  all  cash  receipts  and  the 
postings  are  correct,  the  total  amount  of  the  cash  receipts  posted  to  the  debit  side  of  the 
Cash  account  must  equal  the  total  of  all  the  credits  posted  from  the  cash  receipts  side  of  the 
cashbook. 

The  sum  of  all  cash  paid  out  during  the  month  should  be  $1,308.85.  If  you  find  your  work 
to  be  correct,  extend  the  amount  into  the  right-hand  money  column  as  previously  shown  in 
Illustration  62. 

Post  the  total  amount  of  cash  paid  out  during  the  month  to  the  credit  side  of  the  Cash 
account  in  the  ledger. 

Instructions  for  Checking  the  Cash  Payments. — Compare  the  items  posted  from  the 
cash  payments  side  of  the  cashbook  with  the  items  entered  in  the  ledger  in  the  same  manner 
as  you  previously  compared  the  cash  receipts  side  of  the  cashbook.  Place  a  light  pencil 
check  mark,  thus  (V),  on  the  double  vertical  lines  to  the  left  of  the  amounts  in  the  ledger 
accounts  and  then  check  the  records  on  the  cash  pajonents  side  of  the  cashbook,  thus  (V),  on 
the  double  vertical  lines  to  the  left  of  the  amounts  as  shown  in  the  following  illustrations. 


Cash  Payments 


Illustration  83 


ACCOUNT  DEBITED 


/.      -?. 


^&1^<?-Z,£i,^^ 


EXPLANATION 


/fc^*^-€?-^  /^//  V 


jrc?. 


oo 


Illustration  84 


^f- 


^c;^^^^<^2<;i,^*^ 


30 


C^ci>t-i^^-ti<Z'££iyt^ 


e 


J 

' 

j-o 

i?ff 

A 

// 

s-c? 

J 

70 

/O    7 

Check  all  the  entries  on  the  cash  payments  side  of  the  cashbook  to  the  ledger  following  the 
same  method  for  each  of  the  items. 


104 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Theory  of  Debits  and  Credits. — You  have  observed  from  the  foregoing  postings  and  check- 
ings that  the  sum  of  all  cash  payment  posted  to  the  credit  side  of  the  Cash  account  equals 
the  sum  of  tiie  individual  amounts  which  have  been  posted  to  the  various  accounts  to  whom 
the  cash  was  paid.     The  following  illustration  will  show  this  more  clearly. 


DEBITS 

CREDITS 

General  Expense 

$50 

00 

Cash  Or. 

$2,147 

25 

General  Expense 

17 

50 

James  T.  Hart 

761 

61 

Walter  T.  Scott 

150 

00 

James  T.  Hart 

50 

00 

E.  M.  Grace 

100 

00 

Walter  T.  Scott 

202 

34 

H.  H.  Hall 

670 

80 

James  T.  Hart 

75 

00 

General  Expense 

70 

00 

Total 

Total 

$2 , 147 

25 

$2,147 

25 

Comment :  The  Cash  account  in  the  ledger  has  been  credited  for  the  sum  of  all  cash  pay- 
ments (S2, 147.25)  recorded  on  the  cash  payments  side  of  the  cashbook. 

The  above  Personal  accounts  have  been  debited  in  the  ledger  for  the  individual  amounts 
(totaling  S2, 147.25)  recorded  on  the  cash  payments  side  of  the  cashbook. 

From  the  above  illustration  it  is  evident  that  if  the  total  of  all  cash  paid  out  and  the 
postings  are  correct,  the  total  of  all  debits  posted  from  the  credit  side  of  the  cashbook  must 
equal  the  total  amount  of  the  cash  payments  posted  to  the  credit  side  of  the  Cash  account. 

Balancing  and  Proving  the  Cashbook. — To  balance  the  cashbook  ascertain  the  difference 
between  the  cash  receipts  and  the  cash  payments,  and  this  difference  added  to  the  sum  of 
the  cash  payments  must  equal  the  cash  receipts.  This  is  known  as  balancing  the  cashbook. 
The  cashbook  should  be  balanced  at  frequent  intervals.  It  is  well  to  balance  the  cashbook 
daily,  if  a  considerable  amount  of  cash  is  received  and  paid  out. 

Mr.  Brown  reports  that  he  has  §2,216.65  belonging  to  the  business  on  deposit  in  the  bank. 
By  deducting  the  amount  paid  out,  S2, 147.25,  as  shown  on  the  credit  or  cash  pajmients  side 
of  the  cashbook  from  the  amount  received,  84,363.90,  as  shown  on  the  debit  or  cash  receipts 
side  of  the  cashbook,  you  will  find  the  difference  to  be  S2,216.65  which  equals  the  amount 
which  Mr.  Brown  has  in  the  bank  in  the  name  of  the  firm.  This  is  called  proving  the  cash. 
If  the  cash  which  Mr.  Brown  has  in  the  bank  in  the  name  of  the  l)usiness,  does  not  equal  the 
difference  between  the  cash  receipts  and  cash  payments  in  the  cashbook,  the  cash  is  said  "not 
to  prove." 

Turn  to  your  cashbook  and  on  the  cash  payments  side  make  an  entry,  in  red  ink,  for  the 
cash  balance.     Balance  and  rule  the  cashbook  as  previously  shown  in  Illustration  64.     The 


BOOKKEEPING   WITHOUT  BUSINESS  PAPERS  105 

double  ruling,  as  well  as  the  single  ruling  above  the  final  footings  on  either  side  of  the  cash- 
book,  should  be  on  the  same  level.  The  cash  balance  ($2,216.65)  should  be  entered  on  the 
opposite  or  cash  receipts  side  underneath  the  double  red  ruling  in  the  second  money  column. 

The  total  amount  of  the  cash  receipts  and  the  total  amount  of  the  cash  payments  which 
have  been  posted  to  the  Cash  account  in  the  ledger  must  show  the  same  balance  as  the  cash- 
book.  The  Cash  account  in  the  ledger  shows  only  monthly  totals  of  cash  transactions.  Future 
postings  to  the  Cash  account  in  the  ledger  must  be  only  for  new  totals  of  cash  receipts  and 
payments.  It  is  particularly  important  that  the  cash  receipts  should  be  shown  separately 
from  the  previous  balance  when  a  cash  account  is  kept  in  the  ledger  to  which  footings  are 
posted.  For  this  reason  we  extend  the  amount  into  the  second  money  column.  If  the  balance 
were  brought  down  into  the  first  money  column,  it  would  be  included  in  the  footing  of  that 
column. 

A  Trial  Balance  of  Differences 

We  have  learned  that  a  trial  balance  of  totals  is  a  test  to  ascertain  whether  the  ledger  is 
in  balance.  In  a  trial  balance  of  differences,  the  balances  of  the  several  accounts  are  entered 
instead  of  the  totals.  This  is  based  upon  a  principle  of  mathematics,  namely,  "Equals  sub- 
tracted from  equals  give  equals."  Take  for  example  the  Cash  account.  The  account  shows 
that  the  business  has  received  $4,363.90  and  has  paid  out  $2,147.25.  Deducting  $2,147.25 
from  both  the  debit  and  credit  side  of  the  Cash  account,  the  debit  side  becomes  $2,216.65  and 
the  credit  side  becomes  zero.  Since  the  total  debits  of  the  ledger  equal  the  total  credits,  it  is 
evident  then  that  the  sum  of  the  debit  balances  must  equal  the  sum  of  the  credit  balances. 

A  Trial  Balance  of  Differences  is  a  list  or  schedule  of  the  debit  and  credit  balances  of 
all  the  accounts  remaining  open  in  the  ledger  at  any  specified  time  together  with  the  foho 
and  the  name  of  the  account. 

Taking  a  Trial  Balance,  September  30,  19—. 

Detailed  instructions  follow  to  aid  you  in  taking  a  trial  balance  of  differences  from  your 
ledger. 

1.  Use  a  sharp  pointed  lead  pencil.     A  soft  pencil  should  not  be  used  as  it  is  very  difficult 

to  make  neat  figures  with  one. 

2.  Without  drawing  hues,  foot  the  debit  and  credit  sides  of  each  account  in  the  ledger 

in  small  pencil  figures  just  under  the  blue  line  immediately  below  the  last  amount, 
and  place  the  difference  between  the  two  sides  in  small  pencil  figures  on  the  larger 
side  of  the  account  as  shown  in  the  model  ledger  accounts. 

3.  Take  a  sheet  of  journal  paper,  and  on  the  blue  line  at  the  top  write  Trial  Balance, 

September  30,  19—. 
On  the  first  line  below  the  ruling  write  Cash,  and  in  the  debit  money  column,  $2,216.65, 
the  difference  between  the  two  sides  of  the  ledger  account.     Place  the  ledger  folio 
number  in  the  column  to  the  left  of  the  term  Cash  in  the  trial  balance. 

4.  On  the  second  line  write  William  H.  Brown,  Capital,  and  in  the  credit  money  column, 

the  amount  of  Mr.  Brown's  investment  in  the  business.  When  an  account  in  the 
ledger  has  only  one  credit  or  debit  entry,  the  balance  is  shown  by  the  single  amount. 


106 


BOOKKEEPING  FOR   MODERN  BUSINESS 


5.  In  the  same  manner  write  Merchandise  Purchases  on  the  third  hne;    Merchandise 

Sales  on  the  fourth  Hne. 

6.  On  th(>  fifth  hne  write  General  Expense,  and  in  the  debit  colmnn,  the  amount  of  the 

debit  footing.  Where  there  are  two  or  more  items  on  either  side  of  an  account, 
the  balance  is  shown  by  the  sum  of  these  items. 

7.  On  the  sixth  Hne  write  William  French  &  Co.,  and  in  the  debit  column,  the  difference 

between  the  two  sides  of  his  ledger  account.  Do  not  include  the  $245.75  in  your 
addition.     Amounts  above  the  rcnl  lines  are  not  included  in  the  totals. 

8.  On  the  seventh  line  write  E.  W.  Jones,  and  in  the  debit  column  write  the  amount  of  the 

debit  footing. 

9.  On  the  eighth  line  write  T.  C.  Miller,  and  in  the  debit  column  write  the  balance  of 

his  account. 

10.  In  the  same  manner  write  T.  M.  Rice  &  Co.  on  the  9th  line;  C.  J.  Thomas  on  the  10th 

line;  omit  John  J.  Hill's  account  as  the  two  sides  of  the  account  are  equal;  J.  C. 
Keller  on  the  11th  line;  James  T.  Hart  on  the  12th  line;  omit  H.  H.  Hall's  account 
as  the  two  sides  are  equal;  Walter  T.  Scott  on  the  13th  line;  and  E.  M.  Grace  on 
the  14th  line. 

11.  Add  each  column  of  the  trial  balance.     The  total  debits  should  equal  the  total  credits. 

Rule  the  trial  balance  similarly  to  the  model  trial  balance  as  shown  in  Illustration  85. 

12.  Present  your  trial  balance  to  your  instructor  for  examination  and  approval. 


A   Trial   Balance   of   Differences   Illustrated 

The  following  illustrates  the  form  of  a  trial  balance  of  differences, 
balance  is  similar  in  form  and  arrangement. 


See  that  your  trial 


Trial  Balance,  September  30,  19 — 


Illustration  85 


Cash 

George  E.  Benson,  Capital 

Merchandise  Purchases 

Merchandise  Sales 

General  Expense 

Walter  Bailey  &  Co. 

John  W.  Cooper 

George  M.  Gray 

Oliver  C.  Reed 

J.  C.  Williams  &  Co. 

W.  A.  Moore 

William  Jackson 

James  D.  Bunting 

C.  H.  Green 


$2,060 

2,341 

115 
126 
209 
141 
138 
56 
107 


$5 , 295 


46 

17 

35 
10 
50 
50 
50 
00 
00 


58 


$2 

500 

00 

1 

831 

85 

117 
274 
571 

41 
46 
86 

$5 

,295 

58 

BOOKKEEPING   WITHOUT  BUSINESS  PAPERS 


107 


Suggestions  for  Finding  Errors  in  a  Trial  Balance : 

1.  Verify  your  additions  both  in  the  trial  balance  itself  and  in  each  ledger  account;   also 

verify  your  subtractions  in  finding  the  difference  between  the  sides  of  the  ledger 
accounts. 

2.  Find  the  exact  amount  of  the  difference  between  the  two  sides  of  the  trial  balance 

and  look  through  your  books  of  original  entry  to  see  if  any  such  amount  appears 
in  one  of  them.  If  you  find  the  amount,  the  error  may  be  the  result  of  your  failing 
to  post  that  amount. 

3.  An  item  posted  to  the  wrong  side  of  the  ledger  will  cause  a  difference  of  twice  the 

amount  of  the  item.  Divide  the  amount  of  the  error  in  the  trial  balance  by  2,  and 
look  for  an  amount  corresponding  to  this  result. 

4.  If  the  difference  between  the  sides  of  the  trial  balance  is  divisible  by  9,  it  is  probable 

that  some  figures  in  the  column  have  been  transposed  in  posting,  for  example,  ^87.50 
posted  as  $78.50. 

5.  If  the  difference  between  the  sides  of  the  trial  balance  is  divisible  by  99,  it  is  probably 

due  to  a  transplacement  of  some  figures,  for  example,  ifGO.OO  for  60«f. 

6.  See  that  the  balances  of  all  accounts  were  properly  brought  down  when  the  ledger  was 

closed  at  the  end  of  the  last  business  period. 

7.  If  the  error  is  not  discovered  by  any  of  these  methods,  carefully  check  all  the  postings 

following  the  instructions  previously  given  at  the  end  of  the  September  work. 

8.  There  are  three  very  common  errors  which  a  trial  balance  will  not  disclose.     It  may 

balance,  and  errors  exist  nevertheless.     A  bookkeeper  first  may   fail   to   make  a 
record  for  a  transaction;  second,  if  a  journal  entry,  fail  to  post  an  entire  transaction; 
third,  post  an  amount  to  the  correct  side  but  to  the  wrong  ledger  account. 
It  is  well,  therefore,  to  check  the  entire  work,  following  the  instructions  previously 
given  for  checking  the  various  books  of  original  entry,    since  a   trial   balance  is 
not  a  positive  proof  of  the  correctness  of  the  ledger  because  it  will  not  disclose  these 
errors. 
Correction  of  Errors. — If  an  error  is  made  in  a  book  of  original  entry  and  the  error  is  dis- 
covered before  the  entry  is  posted,  do  not  erase  it  or  scratch  it  out,  but  rule  a  light  red  hne 
through  the  wrong  entry  or  amount,  and  place  the  right  entry  or  amount  above  it.     As  a 
general  rule,  no  erasures  should  be  made  in  books  of  original  entry. 

For  example,  if  a  cashbook  entry  is  wrong,  correct  it  as  follows:  Draw  a  light  single  red 
line  through  the  wrong  name  or  amount,  and  then  write  the  correct  name  or  amount  above,  as 
follows: 

Illustration  86 


^ 


/Z^t?-6ey^  (i//  ^^:=Ct^c.e^^■C€>-<::^€^■■^^ 


^aoao 


If  the  incorrect  entry  has  been  posted  to  the  wrong  account,  one  of  two  methods  may  be 
followed: 


108 


BOOKKEEPING  FOR   MODERN  BUSINESS 


First,  the  better  method  is  to  make  a  correcting  or  adjusting  entry  in  the  journal  when 
the  mistake  is  discovered.  For  example,  instead  of  changing  the  original  cashbook  entry  as 
shown  in  the  above  illustration,  the  following  journal  entry  may  l)e  made  which,  when  posted, 
cancels  the  incorrect  credit  to  Thomas  Brown's  account  and  credits  the  Notes  Receivable 
account. 

Illustration  87 


y£Z-OC'C>-t'l^ 


■ih..£y 


,'^t2't^>e?z-«-»-t. 


^ 


soc^  CO 


sot  oo 


Second,  instead  of  making  a  correcting  or  adjusting  entry  in  the  journal  when  the  error 
is  discovered,  change  the  original  cashbook  entrj^  by  drawing  a  light  red  hne  through  the 
wrong  name  and  then  writing  the  correct  name  above  as  shown  in  the  cashbook  Illustration 
86,  for  Thomas  Brown's  entry. 

Cancel  the  incorrect  credit  to  Thomas  Brown's  account  by  drawing  a  light  red  line  through 
the  wrong  entry ;  then  post  the  amount  to  the  Notes  Receivable  account. 

If  it  is  found  that  the  wrong  amount  has  been  posted  in  the  ledger,  correct  it  as  follows: 

Draw  a  light  red  hne  through  the  wrong  amount  and  write  the  correct  amount,  in  black 
ink,  above  the  amount  canceled,  as  follows: 

Illustration  88 


^9- 


Ja 


;^' 


J2SC  OO 


6 


If  it  is  found  that  an  amount  has  been  posted  on  the  wrong  side  of  a  ledger  account, 
correct  it  as  follows: 

Draw  a  light  red  line  through  the  wrong  entry  and  post  the  amount  on  the  proper  side 

of  the  account,  as  follows: 


Illustratioa  89 


BOOKKEEPING  WITHOUT  BUSINESS  PAPERS 


109 


1^ 


/- 


x^S^  /^^^f-f-i^  ui^i^-e^ 


CJih^  Y'^  "^ 


S(PO  OO 


7 


^ 


^ 


frfTfx^^ 


Supplementary  Exercise  74 

The  books  used  in  this  set  arc  the  journal,  the  oashbook,  the  purchases  journal,  the  sales 
journal,  and  the  ledger.  Open  the  following  accounts  in  the  ledger,  three  accounts  on  each 
page,  in  the  order  given.  You  will  be  instructed,  from  time  to  time,  when  to  post  to  these 
ledger  accounts. 

Cash  S.  J.  Keller,  687  Wabash  Ave.,  City. 

T.  C.  Miller,  Capital.  R.  T.  IMartin,  767  Green  St.,  City. 

IMerchandise  Purchases  Henry  Davis,  316  Market  St.,  City. 

Merchandise  Sales  Smith  &  Co.,  248  Spring  Ave.,  City. 

General  Expense  H.  H.  ^^^lite,  918  Huntingdon  St.,  City. 

Henry  Walker,  814  Ridge  Ave.,  City.  A.  B.  Brown  &  Co.,  218  Mill  St.,  City. 


September  1. 


3. 

4. 
5. 

6. 

8. 
9. 


11. 

12. 

13. 
15. 

16. 
18. 
19. 


21. 


T.  C.  ]\Iiller  has  this  day  invested  $5,000.00  in  the  flour  and  grain  business 

at  746  Frankford  Ave.,  your  city. 
Paid  rent  for  the  month  of  September  in  cash,  S60.00. 
Bought  of  Henrv  Davis,  316  Market  St.,  City,  on  account  at  12 days,  125 

bu.  wdieat  at'$1.68  perbu.,  345  bu.  rye  at  $1.15  per  bu. 
Bought  of  Smith  &  Co.,  248  Spring  Ave.,  City,  on  account,  435  bu.  corn 

at  $1.39  per  bu.,  207  bu.  oats  at  61  (^  per  bu. 
Sold  to  Henry  Walker,  814  Ridge  Ave.,  City,  on  account  at  15  days,  80 

bu.  wheat  at  $1.78  per  bu.,  72  bu.  corn  at  $1.47  per  bu. 
Paid  for  a  set  of  books  and  stationery  for  office  use,  $12.25. 
Sold  to  A.  B.  Brown  &  Co.,  218  Mill  St.,  City,  on  account,  105  bu.  oats  at 

70^  per  bu. 
Bought  of  Henry  Davis,  on  account,  70  bl^l.  flour  at  $10.04  per  bbl. 
Received  cash  from  A.  B.  Brown  &  Co.,  on  account,  $60.00. 
Paid  Smith  &  Co.,  cash  to  apply  on  account,  $50.00. 
Post  the  transactions  from  your  purchases  journal,  sales  journal,  and 

cashbook.     Rule  out  all  balancing  items  in  the  Personal  accounts  as  the 

balancing  items  are  posted. 
Bought  of  H.  H.  White,  918  Huntingdon  St.,  on  account  at  10  daj^s, 

100  bu.  wheat  at  $1.68  per  bu.,  195  bu.  oats  at  61e  per  bu. 
Sold  to  S.  J.  Keller,  687  Wabash  Ave.,  Citv,  on  account  at  10  days,  210 

bu.  rye  at  $1.24  per  bu.,  20  bbl.  flour  at  $10.86  per  bbl. 
Paid  Henry  Davis  cash  in  full  for  invoice  of  the  2d. 
Sold  to  R.  T.  Martin,  767  Green  St.,  City,  on  account,  215  bu.  corn  at 

$1.47  per  bu.,  135  bu.  rye  at  $1.24  per  bu. 
Paid  Smith  &  Co.  cash  for  the  balance  of  invoice  of  the  2d. 
Received  cash  from  Henry  Walker  in  full  for  bill  of  the  3d. 
Sold  to  Henry  Walker,  on  account,  85  bu.  corn  at  $1.47  per  bu.,  97  bu. 

oats  at  10<t  per  bu. 
Sold  to  A.  B.  Brown  &  Co.,  on  account,  50  bbl.  flour  at  $10.86  per  bbl. 
Paid  H.  H.  White  cash  in  full  for  invoice  of  tne  11th. 


110  BOOKKEEPING   FOR   MODERN  BUSINESS 

September  22.     Rpcoivod  cash  from  S.  J.  Kollor  in  full  for  bill  of  the  12th. 

Post  the  transactions  from  your  i)urchases  journal,  sales  journal,  and  cash- 
book.  Rule  out  all  l)alancins  items  in  the  Personal  accounts  as  the 
balancing  items  are  posted. 

23.  Bought  of  Henry  Davis,  on  account  at  10  days,  70  bu.  corn  at  SI. 39 

per  bu. 

24.  Bought  of  Smith  &  Co.,  on  account,   120  bu.  rye  at  81.15  per  l)u.,  90 

bu.  oats  at  Q16  per  bu. 

25.  Received  cash  from  A.  B.  Brown  &  Co.,  to  apply  on  bill  of  the  19th, 

•SI  75.00. 

27.     Sold  to  S.  J.  Keller,  on  account  at  10  days,  275  ])u.  oats  at  70(^  per  bu., 
145  bu.  wheat  at  SI. 78  per  l)u. 

30.     Paid  clerk 's  salary  in  cash,  S60.00. 

Post  tlie  transactions  from  your  purchases  journal,  sales  journal,  and  cash- 
book.  Rule  out  all  l^alancing  items  in  the  Personal  accounts  as  the 
balancing  items  are  posted.  Close  and  check  the  cashbook,  purchases 
journal,  and  sales  journal,  and  take  a  trial  balance  of  your  ledger. 
The  work  of  the  entire  exercise  should  now  be  submitted  to  your  instructor 
for  examination  and  approval. 

Supplementary  Exercise  75 

The  books  used  in  this  set  are  the  journal,  the  cashbook, the  purchases  journal,  the  sales 
journal,  and  the  ledger.  Open  the  following  accounts  in  the  ledger,  three  accounts  on  each 
page,  in  the  order  given.      You  will  be  instructed  when  to  post  to  these  ledger  accounts. 

Cash.  T.  B.  Jackson,  234  Master  St.,  City. 

jMerchandise  Purchases.  D.  ]\I.  Howard,  56  Spencer  St.,  City. 

IMerchandise  Sales.  Henry  Dickson,  90S  Berks  St.,  City. 

General  Expense.  William  Dawson,  1123  Adams  St.,  City. 

H.  W.  Patten,  Capital.  Henry  J.  Turner,  23  Clarkson  St.,  City. 

Burton  Bros.,  234  Green  St.,  City.  Smith  &  Baker,  1141  Diamond  St.,  City. 

John  Smith,  1213  Lehigh  Ave.,  City. 

October  1.     H.  W.  Patten  began  the  flour  and  grain  business  this  day  at  648  Broad  St., 
City,  investing  cash,  S2,400.00. 

2.  Paid  E.  B.  Race  cash  for  the  rent  of  the  store  for  one  month,  840.00. 

3.  Bought  of  Charles  Brown  for  cash,  a  set  of  office  books,  814.75. 

4.  Bought  of  Henry  Dickson,  908  Berks  St.,  City,  on  account,  117  bu.  wheat 

at  SI. 71  per  bu.,  137  bu.  corn  at  SI. 36  per  bu. 

5.  Bought  of  William  Dawson,  1123  Adams  St.,  Citv,  on  account  at  10  days, 

252  bu.  oats  at  63d  per  bu.,  40  bbl.  flour  at  Sl6.14  per  bbl. 

6.  Sold  to  Burton  Bros.,  234  Green  St.,  Citv,  on  account,  12  bbl.  flour  at 

810.89  per  bbl.,  50  bu.  oats  at  7U  per  bu. 

8.  Bought  of  Henrv  J.  Turner,  23  Clarkson  St.,  City,  on  account,  125  bu.  rye 

at  81.14  per  bu.,  83  bu.  wheat  at  81.71  per  bu. 

9.  Paid  Henrv  Dickson  cash  in  full  of  invoice  of  the  5th. 

10.  Sold  to  John  Smith,  1213  Leiiigh  Ave.,  City,  on  account  at  10  days.  100 

bu.  wheat  at  S1.81  per  bu.,  75  bu.  oats  at  71d  per  1)U. 
Bought  of  Henry  Dickson,  on  account  at  20  days,  100  bu.  rye  at  SI. 14  per 
bu.,  112  bu.  corn  at  S1.36  per  bu. 

11.  Received  cash  from  Burton  Bros,  to  ajiply  on  account,  875.00. 

Post  tiie  transactions  fioin  your  i)urchases  journal,  sales  journal,  and  cash- 
book.  Rule  out  all  l>;ilancing  items  ui  the  Personal  accounts  as  the  bal- 
ancing items  arc  posted. 


BOOKKEEPING  WITHOUT  BUSINESS  PAPERS  111 

October  12.     Bought  of  Smith  &  Baker,  1141  Diamond  St.,  City,  on  account  at  30  days, 
100  bu.  wheat  at  $1.71  per  bu.,  125  bu.  corn  at  $1.36  per  bu. 
Sold  to  Burton  Bros.,  on  account  at  15  days,  95  bu.  rve  at  $1.25  per  bu., 
109  bu.  corn  at  $1.44  per  bu. 

13.  Paid  Henry  J.  Turner  cash  to  apply  on  account,  $100.00. 

14.  Sold  to  T.  B.  Jackson,  234  Master  St.,  City,  on  account,  114  bu.  corn  at 

$1.44  per  bu.,  10  bbl.  flour  at  $10.89  per  bbl. 
Bought  of  William  Dawson,  on  account  at  15  days,  95  bu.  wheat  at  $1.70 
per  bu.,  50  bbl.  flour  at  $10.15  per  bbl. 
16.     Sold  to  Burton  Bros.,  on  account,  82  bu.  wheat  at  $1.82  per  bu.,  40  bbl. 
flour  at  $10.90  per  bbl. 

15.  Paid  William  Dawson  cash  in  full  of  account. 

16.  Sold  to  Burton  Bros.,  on  account,  82  bu.  wheat  at  $1.82  per  bu.,  40  bbl. 

flour  at  $10.90  per  bbl. 

17.  Sold  to  D.  M.  Howard,  56  Spencer  St.,  City,  on  account  at  30  days,  100  bu. 

corn  at  $1.44  per  bu. 

18.  Received  cash  from  T.  B.  Jackson  to  apply  on  account,  $100.00. 

19.  Bought  of  Smith  &  Baker,  on  account,  87  bu.  rye  at  $1.14  per  bu.,  Ill  bu. 

wheat  at  $1.70  per  bu. 

20.  Received  cash  from  John  Smith  for  bill  of  the  10th. 

22.  Sold  to  Burton  Bros.,  on  account,  125  bu.  wheat  at  $1.81  per  bu.,  75  bu. 

oats  at  71d  per  bu. 

23.  Bought  of  Henry  J.  Turner,  on  account,  50  bbl.  flour  at  $10.14  per  bbl., 

100  bu.  rye  at  $1.14  per  bu. 
Post  the  transactions  from  your  purchases  journal,  sales  journal,  and  cash- 
book.     Rule  out  all  balancing  items  as  the  balancing  items  are  posted. 

24.  Sold  to  D.  M.  Howard,  on  account,  85  bu.  r3^e  at  $1.25  per  bu.,  98  bu.  wheat 

at  $1.82  per  bu. 

25.  Paid  Smith  &  Baker  cash  to  apply  on  account,  $75.00. 
Received  from  Burton  Bros,  cash  for  bill  of  the  16th. 

26.  Sold  to  WiUiam  Dawson,  terms  cash,  25  bbl.  flour  at  $10.89  per  bbl.,  150 

bu.  rye  at  $1.23  per  bu.     The  cash  was  received  at  the  time  the  goods  were 
delivered. 

27.  Received  from  Burton  Bros,  cash  to  apply  on  account,  $75.00. 
Received  cash  from  Burton  Bros,  for  bill  of  the  12th. 

28.  Paid  Henry  Dickson  cash  to  apply  on  account,  $100.00. 

Sold  to  John  Smith,  on  account  at  10  days,  75  bu.  rj-e  at  $1.23  per  bu. 

29.  Paid  Smith  &  Baker  cash  in  full  of  invoice  of  the  19th. 
Received  from  D.  M.  Howard  cash  for  bill  of  the  24th. 
Paid  William  Dawson  cash  for  invoice  of  the  14th. 

30.  Paid  Henry  Dickson  cash  in  full  of  invoice  of  the  10th. 
Paid  student  cash  for  services  to  date,  $70.00. 

Post  the  transactions  from  your  purchases  journal,  sales  journal,  and  cash- 
book.  Rule  out  all  balancing  items  in  the  Personal  accounts  as  the  bal- 
ancing items  are  posted.  Close  and  check  the  cashbook,  purchases 
journal,  and  sales  journal,  take  a  trial  balance  of  j^our  ledger. 

The  work  of  the  entire  exercise  should  now  be  submitted  to  your  instructor 
for  examination  and  approval. 

Development  of  the  Notes  Receivable  Book 

Just  as  the  Merchandise  Sales,  the  Merchandise  Purchases,  the  Cash  Receipts,  and  Cash 
Payments  were  taken  from  the  general  journal  and  grouped  in  the  sales  journal,  the  purchases 
journal,  and  the  cashbook  respectively,  in  order  to  avoid  the  unnecessary  repetition  of  the 
credit  Merchandise  Sales,  the  debit  Merchandise  Purchases,  and  the  debit  and  credit  Cash, 


112 


BODKKEEPIXG   FOR   MODERX   BI' SIX  ESS 


so  may  the  record  for  the  Notes  Receivable  1)(>  <ii"iip*''l  i»  the  notes  receivable  book  in  order 
to  avoid  the  unnecessary  repetition  of  the  debit  Notes  Receivable. 

Illustrative  Exercise 

The  following  transactions  are  taken  from  the  books  of  Henry  Bruce. 
October  9.     Received  from  George  L.  Moore,  his  note  at  10  days,  in  pajTnent  of  his  bill 
of  the  5th,  SI  18.56. 
10.     Received  from  J.  AI.  Freeman  &  Co.,  their  10-day  note,  to  apply  on  bill  sold 

them  on  the  4th,  SI 00.00. 
14.     Received  from  Louis  Bond,  his  note  at  20  days  with  interest,  in  paj-ment 

of  his  bill  of  the  5th,  S200.0(). 
19.     Received  from  Stanlev  Gibbon,  his   30-day   note  with  interest,  to  apply 
on  bill  sold  him  on  the  9th,  $150.00. 

The  Journal  Method 
The  following  illustrates  the  method  of  recording  the  foregoing  notes  receivable  trans- 
actions in  the  journal. 

Illustration  90 

October  9,  19- 


Notes  Receivable 

George  L.  Moore 

Notes  Receivable 
J.  M.  Freeman  &  Co 

Notes  Receivable 
Louis  Bond 

Notes  Receivable 
Stanley  Gibbon 


Rec'd  his  note  at  10  days 

in  payment  bill, 10/5 

10 

Rec'd  their  10-day  note  to 

apply  on  bill, 10/4 

14 

Rec'd  his  20-day  note  with 

interest  for  bill, 10/5 

19 

Rec'd  his  30-day  note  with 

interest  to  apply  on  bill, 

10/9 


118 


100 


200 


150 


56 


00 


00 


00 


118 


100 


56 


00 


2oo;oo 


150'00 


Observe  the  repetition  of  the  debit  Notes  Receivable  in  each  transaction.  In  posting 
from  the  journal,  each  credit  amount  is  entered  in  its  respective  account,  and  the  Notes 
Receival)le  account  is  debited  for  the  amount  of  each  note  as  shown  in  the  following  illustration. 

Illustration  91 

Notes  Receivable 


19- 
Oct, 


9 
10 
14 


George  L.  Moore  J 
J.  M.  Freeman  &  Co.  J 
Louis  Bond  J 


19  Stanley  Gibbon 


118 
100 
200 
150 


56 
00 
00 
00 


It  is  quite  evident  from  the  foregoing  journal  entries  and  ledger  account  that  the  unneces- 
sary repetition  of  the  del)it  Notes  Receivable  might  ho  avoided  if  certain  pages  of  the  journal 
were  reserved  exclusivelv  for  tiie  notes  receivable. 


BOOKKEEPING   WITHOUT  BUSINESS  PAPERS 


113 


Illustration  92 


October  9,  19- 


George  L.  Moore 


J.  M.  Freeman  &  Co 


Louis  Bond 


Stanley  Gibbon 


Notes  Receivable, 


Rec'd  his  note  at  10  days  in 

payment  bill,  10/5 

10 

Rec'd  their  10-day  note  to 

apply  on  bill, 10/4 

14 

Rec'd  his  20-day  note  with 

interest  for  bill, 10/5 

19 

Rec'd  his  30-day  -note  with 

interest  to  apply  on  bill, 

10/9 

31 

debited 


568 


56 


118 


100 


200 


150 


56 


00 


00 


00 


Observe  that  the  modified  form  of  the  journal  contains  exactly  the  same  complete  informa- 
tion that  the  previous  journal  contained.  In  posting  from  the  modified  form  of  the  journal, 
each  person's  account  is  credited  for  the  value  of  the  note  received  from  him  but  the  Notes 
Receivable  account  is  debited  for  the  sum  of  all  the  notes  received,  as  shown  in  the  follow- 
ing illustration,  instead  of  being  debited  for  each  note. 
Illustration  93 

Notes  Receivable 


19-  ' 
Oct.  31 


Total 


N.  R. 


568 


56 


Compare  the  result  of  the  Notes  Receivable  account  which  contains  the  four  items  posted 
from  the  journal  with  the  Notes  Receivable  account  which  contains  but  one' item  posted  from 
the  modified  form  of  the  journal.  It  will  be  observed  that  the  results  are  the  same,  namely, 
$568.56.  The  unnecessary  repetition  of  the  debit  Notes  Receivable  has  thus  been  avoided 
by  reserving  certain  pages  of  the  journal  exclusively  for  the  notes  receivable. 

The  initials  A^.  R.  are  substituted  for  the  initial  J  in  the  ledger  account  to  show  that 
the  posting  was  done  from  the  modified  form  of  the  journal  instead  of  from  the  journal. 

The  Notes  Receivable  Book. — Just  as  the  record  for  the  merchandise  sales,  the  mer- 
chandise purchases,  the  cash  receipts,  and  the  cash  payments  were  taken  from  the  general 
journal  and  grouped  in  the  sales  journal,  the  purchases  journal,  and  the  cashbook,  so  may  the 
record  for  the  notes  receivable  be  grouped  in  the  notes  receivable  book.  In  order  to  remind 
the  bookkeeper  when  notes  fall  due,  so  as  to  be  ready  to  present  them  for  payment;  to  give 
information  for  the  posting;  and  to  give  other  information  necessary  to  keep  a  complete  record 
of  the  notes,  the  following  specially  ruled  notes  receivable  book  has  been  devised. 


114 


HOOKKEEPING  FOR  MODERN   BUSINESS 
The  Notes  Receivable  Book 


Illustration  94 


NOTES 


no. 


DATE         DRAWER  OR  EITOORSER 
RECEIVED     (DRAFT; 


MAKER  OR  DRAWEE 

(NOTE)  (DRAFT) 


IW  WHOSE  FAVOR 

(PAYEE, 


WHERE  PAYABLE 


/^^ 
(^J^  9 


>''Vs;*a.'i-^*^%?^2<fr<-c-.e^    L-t?^j-?-z-<i>'/ycv^ 


c^i^^-fr**; 


The  Notes  Receivable  Book 
Compare  the  above  notes  receivable  book  with  the  modified  form  of  the  journal  (see 
Illustration  92).  The  notes  receivable  book  contains  a  more  complete  record  of  the  notes 
than  either  the  general  journal  or  the  modified  form  of  the  journal.  The  result  as  shown 
by  the  closing  entry  of  the  notes  receivable  book  is  exactly  like  that  shown  by  the  modified 
ferm  of  the  journal.  In  posting  from  the  notes  receivable  book,  each  person's  account  is 
credited  for  the  value  of  the  note  received  from  him,  and  the  Notes  Receivable  account  is 
debited  for  the  sum  of  all  the  notes. 

Exercises  for  the  Student 

Design  a  notes  receivable  book  like  Illustration  94.  The  headings  of  the  columns 
should  be  lettered.  Close  the  notes  receivable  book  at  the  end  of  the  month.  The  notes  are 
received  on  account,  and  payable  at  the  Commercial  Bank. 

Exercise  76 
Transactions  relating  to  notes  receivable  in  the  books  of  L.  L.  Tucker. 

September  1.  He  received  a  note  at  60  days  for  $250.00  from  A.  H.  Wilson. 

3.  He  received  a  note  at  90  days  for  $475.00  from  C.  J.  Bowman. 

5.  He  received  a  note  at  45  days  for  $175.00  from  W.  ().  Weaver. 

11.  He  received  a  note  at  1  month  for  $200.00  from  A.  B.  Riker. 

17.  He  received  J.  H.  Gilson's  20-day  note  for  $350.78. 

24.  He  received  G.  A.  Taylor's  10-day  note  for  $235.67. 

29.  He  received  a  note  at  60  days  for  $326.78  from  W.  A.  iVIcBane. 

Exercise  77 
Transactions  relating  to  notes  receivable  in  the  book  of  W.  O.  Weaver. 
He  received  H.  R.  Shaff's  60-day  note  for  $567.45. 


October  1. 
8. 
16. 
24. 
26. 
28. 


He  received  a  note  at  1  month  for  $925.34  from  R.  D.  Smith. 
He  received  a  note  at  90  days  for  $325.76  from  Thomas  Moore. 
He  received  Charles  Cameron's  10-day  note  for  $100.25. 
He  received  a  note  at  30  days  from  (Jeorgc  L.  Brown  for  $112.34. 
He  received  William  Lowe's  10-day  note  for  $562.52. 


BOOKKEEPING   WITHOUT  BUSINESS  PAPERS 
The  Notes  Receivable  Book 


115 


Illustration  94 

RECEIVABLE 


DATE 


Month 


TIME 
TO 
RUN 


WHEN  DUE 
Year !       Month 


INT. 
RATE 


NOTES 

RECEIVABLE 

DEBITED 


ACCOUNT  CREDITED 


1    f 


6 

/^     6 


2C>cP 


^^y 


oc 

CO 

oc 


jJi. 


/^c^  ]^^L:£^>,y-aJ^A^'..^ 


Development  of  the  Notes  Payable  Book 

Just  as  the  notes  and  other  written  promises  received  from  others  were  taken  from  the 
general  journal  and  grouped  in  the  notes  receivable  book  in  order  to  avoid  the  unnecessary 
repetition  of  the  debit  Notes  Receivable,  so  may  the  record  for  our  written  obligations  be 
grouped  in  the  notes  payable  book  in  order  to  avoid  the  unnecessary  repetition  of  the  credit 
Notes  Payable. 

Illustrative  Exercise 
The  following  transactions  are  taken  from  the  books  of  Henry  Bruce. 
October  12.     Gave  A.  H.  Wilson  a  10-day  note  in  payment  of  invoice  of  the  3d,  $342.00. 
13.     Gave  C.  J.  Bowman  &  Co.    a  10-day  note  for  $500.00  in  part  payment 

of  invoice  of  the  6th. 
25.     Gave  John  Gilfillan  a  30-day  note  with  interest  for  $172.00  in  full  payment 
of  invoice  of  the  15th. 


Illustration  95 


The  Journal  Method 

October  12,  19- 


A.  H.  Wilson 

Notes  Payable 

C.  J.  Bowman  &  Co 
Notes  Payable 

John  Gilfillan 
Notes  Payable 


Gave  my  10-day  note  in  pay- 
ment invc . ,  10/3 
13 

Gave  my  10-day  note  in  part 
payment  invc . ,  10/6 
25 

Gave  my  30-day  note  with  in- 
terest for  invc,  10/15 


342 


500 


172 


00 


00 


00 


342 


500 


172 


00 


00 


00 


Observe  the  repetition  of  the  credit  Notes  Payable  in  each  transaction.  In  posting 
from  the  journal,  each  debit  amount  is  entered  in  its  respective  account,  and  the  Notes 
Payable  account  is  credited  for  the  amount  of  each  note  as  shown  in  the  following  illustration. 


116 

Illustration  96 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Notes  Payable 


19- 
Oct. 


12 
13 
25 


A.  H.  Wilson 

J 

342 

00 

C.  J.  Bowman  &  Co. 

J 

500 

00 

John  Gilfillan 

J 

172 

00 

It  is  quite  evident  from  the  foregoing  journal  entries  and  ledger  account  that  the  unneces- 
sary repetition  of  the  credit  Notes  Payable  might  be  avoided  if  certain  pages  of  the  journal 
were  reserved  exclusively  for  the  notes  payable.  Instead  of  crediting  the  Notes  Payable 
account  each  time  some  other  item  is  debited,  the  Notes  Payable  account  may  be  credited 
for  the  sum  of  these  credits  as  shown  in  the  following  modified  form  of  the  journal. 


Illustration  Q7 


October  12,  19- 


A.  H.  Wilson 


C.J.  Bowman  &  Co 


John  Gilfillan 


Notes  Payable, ere 


Gave  my  10-day  note  in  pay-   342 
ment  invc. ,  10/3 
13 

Gave  my  10-day  note  in  part   500 
payment  invc . ,  10/6 
25 

Gave  my  30-day  note  with  in- 
terest for  invc,  10/15       172 

31 
dited 


00 


00 


00 


1014 


00 


Observe  that  the  modified  form  of  the  journal  contains  exactly  the  same  complete  informa- 
tion that  the  previous  journal  contained.  In  posting  from  the  modified  form  of  the  journal, 
each  person's  account  is  debited  for  the  value  of  the  note  given  to  him  but  the  Notes  Payable 
account  is  credited  for  the  sum  of  all  the  notes  issued,  as  shown  in  the  following  illustration, 
instead  of  being  credited  for  each  note. 

Illustration  98 

Notes  Payable 


19-    1 
Oct.  31 

Total 


N.P. 


101400 


Compare  the  result  of  the  Notes  Payable  account  which  contains  the  three  items  posted 
from  the  journal  with  the  Notes  Payable  account  which  contains  but  one  item  posted  from  the 
modified  form  of  the  journal.  It  will  be  observed  that  the  results  are  the  same,  namely, 
$1,014.00.  The  unnecessary  repetition  of  the  credit  Notes  Payable  has  thus  been  avoided 
by  reserving  certain  pages  of  the  journal  cxtlu.sivclN-  for  \hv  notes  payable. 


BOOKKEEPING   WITHOUT  BUSINESS  PAPERS  117 

The  initials  A^.  P.  are  substituted  for  the  initial  J  in  the  ledger  account  to  show  that  the 
posting  was  done  from  the  modified  form  of  the  journal  instead  of  from  the  journal. 

The  Notes  Payable  Book. — Just  as  the  record  for  the  notes  receivable  were  taken  from 
the  general  journal  and  grouped  in  the  notes  receivable  book,  so  may  the  record  for  the  notes 
payable  be  grouped  in  the  notes  payable  book.  In  order  to  remind  the  bookkeeper  when  the 
notes  fall  due,  so  as  to  be  prepared  to  meet  written  obligations  of  tlu^  business;  to  give  informa- 
tion for  posting;  and  other  information  necessary  to  keep  a  complete  record  of  the  notes 
issued  by  the  business,  a  specially  ruled  notes  payable  book  has  been  devised.    Illustration  99. 

Compare  the  notes  payable  book  with  the  modified  form  of  the  journal  as  shown  in 
Illustration  97.  The  notes  payable  book  contains  a  more  complete  record  of  the  notes  issued 
by  the  business  than  either  the  general  journal  or  the  modified  form  of  the  journal.  The  result 
as  shown  bj^  the  closing  entry  of  the  notes  payable  book  is  exactly  like  that  shown  by  the 
modified  form  of  the  journal.  In  posting  from  the  notes  payable  book,  each  person's  account 
is  debited  for  the  value  of  the  note  issued  to  him  by  the  business  and  the  Notes  Payable  account 
is  credited  for  the  sum  of  all  the  notes  issued. 

Exercise  for  the  Student 

Design  a  notes  payable  book  on  a  sheet  of  blank  paper  exactly  like  the  model  notes  payable 
book  (see  Illustration  99).  The  headings  of  the  columns  should  be  lettered.  Number  the 
notes  consecutively  as  they  are  entered  in  the  notes  payable  book.  The  notes  are  issued  on 
account,  and  payable  at  the  Commercial  Bank.  Close  the  notes  payable  book  at  the  end  of  the 
month  similarly  to  the  model  notes  payable  book. 

Exercise  78 

Transactions  relating  to  notes  payable  in  the  books  of  David  Fenton. 

September  1.  He  gave  B.  S.  Rose  a  note  at  10  days,  $556.34. 

6.  He  gave  George  C.  Worstal  a  note  at  60  days,  $325.66. 

8.  He  gave  E.  B.  Race  a  note  at  30  days,  $426.89. 

14.  He  gave  Homer  H.  Moore  a  note  at  1  month,  $325.72. 

18.  He  gave  his  45-day  note  for  $761.23  to  Louis  R.  Kenderdine. 

24.  He  gave  G.  M.  Mumford  a  90-day  note,  $252.42. 

26.  He  gave  Walter  Mansley  a  15-day  note,  $101.12. 

28.  He  gave  his  60-day  note  for  $223.23  to  E.  T.  Worthington. 

30.  He  gave  R.  S.  White  a  10-day  note,  $326.45. 

Exercise  79 

October  1.  He  gave  William  Saile  his  note  at  1  month  for  $500.00. 

6.  He  gave  his  30-day  note  for  $490.89  to  T.  S.  Moore. 

8.  He  gave  William  Watson  his  note  at  90  days  for  $150.00. 

11.  He  gave  his  90-day  note  for  $234.56  to  George  Rowe. 

16.  He  gave  his  note  at  20  days  for  $325.87  to  Morris  Reed. 

18.  He  gave  his  90-day  note  for  $50.25  to  L.  C.  Wettling. 

21.  He  gave  Walter  Roberts  his  note  at  30  days  for  $121.12. 

24.  He  gave  his  15-day  note  for  $167.67  to  E.  H.  Buckman. 

27.  He  gave  S.  J.  Williams  his  note  at  2  months  for  $32.56. 

30.  He  gave  his  note  at  10  days  to  K.  H.  Lee  for  $369.03. 


118 


Illustration  99 


BOOKKEKPING   FOR   MODERN   BUSINESS 
The  Notes  Payable  Book 


NOTES 


'  J 


t=^ 


DATE 
GIVEN 


DRAWER  OR  ENDORSER 
(DRAFT) 


MAKER  OR  DRAWEE 
(NOTE)  (DRAFT) 


9- 


IN  WHOSE  FAVOR 

(PAYEE) 


WHERE  PAYABLE 


^,^^d^X^^^ 


Exercise  79  B 

Transactions  relating  to  both  the  Notes  Receivable  and  the  Notes  Payable  accounts  in 
the  books  of  Richard  M.  Holme.  The  notes  are  payable  at  the  Second  National  Bank,  and 
issued  and  received  on  account.  Close  both  the  notes  receivable  and  notes  payable  books  at 
the  close  of  the  month. 


November  1. 
2. 
3. 
4. 
5. 

6. 


9. 

10. 

11. 

12. 

14. 

15. 

17. 
19. 
24. 

26. 

28. 
29. 
30. 


He  gave  J.  B.  Brown  his  note  at  10  days  for  $345.23. 

He  received  a  note  at  1  month  for  $567.24  from  J.  A.  Adams. 

He  gave  his  note  at  60  days  to  C.  M.  Wallace  for  $390.73. 

He  sold  E.  C.  Hanna,  on  his  note  at  30  days,  merchandise,  $324.26. 

He  gave  his  20-day  note  for  $1237.98  to  John  G.  Maxwell,  for  merchandise 

purchased  to-day. 
He  sold  James  Hayes,  on  his  note  at  2  months,  merchandise  amounting 

to  $579.42. 
He  purchased  merchandise  from  H.  P.  Carroll  valued  at  $367.45.     He 

gave  his  60-day  note  in  payment. 
He  gave  his  90-day  note  for  $325.67  to  David  Feaster  for  merchandise 

purchased  on  the  5th. 
He  sold  James  Robinson,  on  liis  note  at  3  months,  merchandise  amount inc; 

to  $352.98. 
He  purchased  merchandise  from  Walter  Holt  valued  at  $658.56.      He 

gave  his  20-day  note  in  paj-ment. 
He  received  a  note  at  30  days  for  $300.00  from  David  Huxlev  to  apply 

on  bill  of  the  11/2. 
He  gave  his  30-day  note  for  $356.03  to  Thomas  Nearing  for  merchandise 

purchased  on  the  10th. 
He  sold  Scott  Burch,  on  his  note  at  2  months,  merchandise  amounting 

to  $592.47. 

.  Chirk,  on  his  20-dav  note,  merchandise,  8567.56. 
.  Allen  iiis  note  at  3  inonths  for  $620.70. 
Downes,  on  his  note  at  15  days,  in(>rchaiuh's(>  amounting  to 


He  sold  H.  J 
He  gave  F.  A 
He  sold  L.  A. 

$625.34. 
He  purcha.scd  nuM-chandise  from  B.  C 

gave  iiis  3()-day  note  in  payment. 
He  gave  i\.  L.  Townsend  his  note  at  15  davs  foi 
Hc!  rec(uved  a  note  at  2  months  for  $250.00 'from  H.  A.  Bishop 
He  gave  his  note  at  20  days  to  W.  O.  McBridc  for  $390.00. 


Newton  valued  at  $326.75.     He 
$300.00. 


BOOKKEEPING   WITHOUT   BUSINESS  PAPERS 
The  Notes  Payable  Book 


119 


Illustration  99 

PAYABLE 


Oo^lJ 


NOTES 
PAYABLE  L.  F. 

CREDITED 


J^/2  \00 


ACCOUNT  DEBITED 


:^ 


/c-in^ 


za 


Exercise  79  C 

December  1.     He  gave  Thomas  Allen  his  note  at  10  days  for  S375.89. 

2.  He  deceived  a  note  at  2  months  for  $56  34  f^'om  John  Halleck. 

3.  He  gave  his  note  at  30  days  to  Richard  Brown  for  $100.00. 

4      He  sold  Thomas  Read,  on  his  note  at  60  days  merchandise,  I60O.OO. 

5;     He  gave  his  20-day  note  for  $789.90  to  Wilham  Gano  for  merchandise 

6.     He^sold  Robert"  Starch,  on  his  note  at  3  months,  merchandise  amounting 
to  'ft82Q  68 

8.  He  purchased  merchandise  from  Samuel  Thurston  valued  at  $628.65. 

He  aave  his  30-day  note  in  payment.  ,       ,• 

9.  He  gave  his  60-day  note  for  $528.45  to  Ernest  Van  Tuyl  for  merchandise 

Durchased  on  the  6th.  ,       t  x- 

10.  He  sold  James  Sutton,  on  his  note  at  1  month,  merchandise  amounting 

11.  HeVurchased  merchandise  from  William  Mcrey  valued  at  $123.34.     He 

gave  his  60-day  note  in  payment. 

12.  He  received  a  note  at  60  days  for  $670.00  from  William  Lakewood  to 

14.  He  gal^e  Ws^4iclly^L\e'^for  $200.00  to  Andrew  Holman  for  merchandise 

15.  He^soldtoS^McCan,'  on  his  note  at  1  month,  merchandise  amounting 

17.     He^'sold  Harry  Scranton,  on  his  30-day  note,  mercliaridise,  $300.00. 

19      He  gave  Robert  Hunter  his  note  at  2  months  for  $350.00.  „„„,•„ 

24.     He  sold  Cxeorge  Greene,  on  his  note  at  30  days,  merchandise  amounting 

26.     He°pSa?ed  merchandise  from  W.  W.  Heberton  valued  at  $345.67. 

He  gave  his  60-day  note  in  payment. 
28      He  gave  Ormond  Rambo  his  note  at  30  days  for  $^00.0U. 
29.     He  received  a  note  at  1  month  for  SIOO.OO  from  A^R  Radcliffe. 
31.     He  gave  his  note  at  45  days  to  J.  S.  Stowell  for  $500.00. 


THE  FLOUR  AND  GRAIN  BUSINESS  WITH 
BUSINESS  PAPERS 


PART   IV 


Henry  Bruce,  Proprietor 

The  object  of  this  set  is  to  give  systematic  drill  in  elementary  business  practice.  Your 
previous  experience  has  only  covered  the  theory  of  the  elementary  principles  of  bookkeeping. 
You  will  now  be  instructed  in  the  use  of  some  of  the  various  business  papers,  the  use  of  the 
files,  and  the  preparation  of  the  business  statements. 

You  have  been  engaged  as  bookkeeper  by  Henry  Bruce,  235  Adams  Street,  who  has 
invested  S3,500.00  in  the  flour  and  grain  business.  Mr.  Bruce  has  deposited  the  $3,500.00, 
the  amount  of  his  investment,in  the  bank,  and,  for  the  present,  will  issue  all  checks  and  receive 
all  cash  paid  to  the  business.  The  invoices  for  merchandise  purchased  and  other  business 
papers  which  ]Mr.  Bruce  desires  to  place  in  your  hands  will  be  found  in  the  envelope  marked 
Incoming  Vouchers.  Each  business  paper  in  this  envelope  is  numbered  to  correspond  with 
the  number  of  the  transaction  in  this  set.  Papers  issued  by  the  business  are  to  be  written 
by  j^ou.  You  will  handle  the  business  papers  and  perform  the  office  routine  as  wx41  as  make 
the  bookkeeping  records. 

The  books  used  are  the  journal,  the  cashbook,  the  purchases  journal,  the  sales  journal,  the 
notes  receivable  book,  the  notes  payable  book,  and  the  ledger. 

Before  making  the  entry  for  any  transaction  in  this  set,  first  determine  which  accounts 
are  affected  by  the  transaction,  and  then  determine  in  which  book  of  original  entry  the  trans- 
action should  be  recorded,  by  applying  the  principles  previously  given. 

Since  a  record  of  a  business  transaction  in  a  book  of  original  entry  simply  indicates  which 
account  is  to  be  debited  and  which  account  is  to  be  credited,  and  later  must  be  posted  to  the 
proper  ledger  account,  open  the  following  accounts  in  the  ledger.  Beginning  on  page  11, 
enter  in  the  order  given,  three  accounts  on  each  page.  You  will  be  instructed,  from  time  to 
time,  when  to  post  from  the  books  of  original  entry  to  these  ledger  accounts. 

Cash.  Walter  Roberts  &  Co.,  Broad  &  Green  Sts. 

Notes  Receivable.  George  L.  Moore,  345  Lehigh  Ave.,  City. 

Merchandise  Inventory.  J.  M.  Freeman  &  Co.,  1143  Arch  St.,  City. 

Notes  Payable.  David  Lane,  1414  Jackson  St.,  City. 

Henry  Bruce,  Capital.  J.  H.  Gilson  &  Co.,  1718  Adams  St.,  City. 

Merchandise  Purchases.  Charles  Smith  &  Co.,  927  Federal  St.,  City. 

Merchandise  Sales.  Omit  one  page. 

General  Expense.  W.  ().  W(>aver,  320  Market  St.,  City. 

Merchandise  Trading.  A.  H.  Wilson,  3451  Walnut  St.,  City. 

Profit  and  Loss.  Walter  E.  Myers,  741  State  St.,  City. 

Omit  one  page.  C.  J.  Bowman  &  Co.,  1172  Union  Ave.,  City. 

(120) 


BOOKKEEPING  WITH   BUSINESS  PAPERS  121 

No.  1. — October  1.  After  reading  page  120  carefully,  make  an  entrv  for  Mr.  Bruce 's 
investment  of  $3,500.00. 

Comment:  As  bookkeeper,  make  the  cashbook  entry,  and  the  journal  memorandum 
for  this  transaction. 

No.  2.— October  2.  Mr.  Bruce  paid  the  City  Real  Estate  Company  $50.00  cash  for  the 
rent  of  the  storeroom  for  October. 

Comment:  A  receipt  is  given  by  the  person  receiving  money  or  goods  to  the  person  from 
whom  such  money  or  goods  is  received  showing  the  date  of  receipt,  the  amount  received,  and 
for  what  received. 

A  receipt  should  always  be  given  for  currency  received. 

The  following  illustrates  a  special  form  of  a  receipt. 

A  Special  Receipt 

Illustration  100 


$<^<P-^^ Philadelphia,  Pa.,  ( Ar./^:^^^     P^        IQ 

Received  of— Au^y/^^^A^^^^^y 


Dollars 


^  The   City  Eeal  Estate   Company 


/y  //  Manage  I 


A  receipt  is  a  written  acknowledgment  of  money  or  goods  received. 

Instructions:  This  special  receipt  will  be  found  in  the  envelope  marked  Incoming 
Vouchers.  This  is  the  first  business  paper  that  has  been  received  by  you  and  is  numbered  2 
to  correspond  with  the  number  of  this  transaction. 

Determine  what  accounts  are  affected  before  making  your  record  for  the  above  trans- 
action in  the  proper  book  of  original  entry.  The  bookkeeping  entry  should  always  be  made 
before  the  papers  used  in  the  transaction  are  filed,  as  the  papers  contain  the  information 
necessary  for  the  entry.  Enter  the  transaction  in  a  book  of  original  entry  at  the  time  the 
papers  are  received.  Write  the  word  Entered  across  the  face  of  the  receipt  with  the  date 
underneath  (see  Illustration  100). 

Accompanying  your  supplies  will  be  found  filing  devices  consisting  of  a  number  of 
envelopes,  each  marked  to  show  what  it  should  contain.  File  the  receipt  by  placing  it  in  the 
envelope  marked  Receipts  and  Paid  Bills.  Do  not  underestimate  the  importance  of  filing 
all  papers  where  they  belong.  Unless  the  papers  are  filed  properly,  it  will  be  impossible  for 
you  to  find  quickly  the  business  papers  which  Mr.  Bruce  may  need. 


122 


BOOKKEEPING  FOR   MODERN  BUSINESS 


No.  3.— October  3.  Bought  of  W.  0.  Weaver,  320  Market  St.,  City,  merchandise  as 
per  invoice. 

Comment:  This  invoice  will  be  found  in  the  envelope  marked  Incoming  Vouchers.  This 
is  the  second  business  paper  that  has  been  received  by  you  and  is  numbered  3  to  correspond 
with  the  number  of  this  transaction. 

Mr.  Bruce  has  compared  the  items  of  the  invoice  with  the  goods  received,  has  O.  K.'d  the 
prices,  and  has  placed  his  check  marks,  thus  (V),  to  the  left  of  the  fjuantitics  purcliased  and 
the  unit  prices  per  bushel. 

Mr.  Bruce  instructs  you  to  verify  the  multiplications  and  addition,  and  if  you  find  them 
to  be  correct,  check  each  item  on  the  invoice  by  placing  a  check  mark,  thus  (\ ),  on  the  double 
vertical  lines  to  the  left  of  the  amount  of  each  item.  The  fact  that  an  invoice  is  made  out  in 
correct  form  does  not  indicate  that  the  extensions  are  correct.  In  all  calculations  in  this 
text  where  the  result  is  a  fraction  of  one  cent,  the  fraction  is  regarded  as  a  cent  if  its  value  is 
one-half  or  more;  if  less  than  one-half  a  cent  it  is  discarded.  Write  0.  K.  with  your  initials 
underneath  in  the  lower  right-hand  corner  of  the  invoice  if  you  find  it  to  be  correct. 

If  an  item  or  the  amount  of  the  invoice  is  wrong,  ask  your  teacher,  representing  W.  0. 
Weaver,  to  correct  it  for  you. 

The  following  illustrates  how  the  invoice  should  be  checked. 

An  Invoice 

Illustration  101 


Philadelphia,  Pa.,_ 


October  3,      ^9 


W.  O.  WEAVER 

SEEDS     GRAIN 
320  MARKET  STREET 
Sold  to       Henry  Bruce 


235  Adams  Street,    City 


Terms     0^  a/c 


260  bu.  Corn 
350   "   Wheat 


V  1.45 

V  1.65 


V  377 

V  577 


00 

50 


V  954 


50 


Do  not  file  tii(!  invoice  until  3'ou  have  made  the  proper  entry  in  the  {)urcliases  jouriKil, 
since  tiie  invoice  contains  the  necessary  information  for  making  your  entry.  Write  the  word 
Entered  across  the  face  of  the  invoice  witli  the  date  tuiderneatli  aft(>r  you  lia\-e  made  your 
entry  from  it. 

Fold  the  invoice,  face  outward,  and  place  it  in  the  envelope  marked  Invoices  Payable.     All 
unpaid  iii\'oices  sliould  be  filed  in  this  envel()i)e. 


BOOKKEEPING   WITH  BUSINESS  PAPERS 


123 


No.  4.— October  3.  Bought  of  A.  H.  Wilson,  3451  Walnut  St.,  City,  merchandise  as 
per  invoice. 

Instructions:  Verify  the  multiplications  and  addition,  and  if  you  find  them  to  be  correct, 
O.K.  the  invoice  as  instructed  in  the  previous  transaction.  Make  the  proper  entry  for  tlie 
purchase  after  which  file  the  invoice,  face  outward,  in  the  Invoices  Payable  file,  directly  in 
front  of  the  last  invoice. 

No.  5. — October  4.  Bought  of  Johnson  &  Co.,  for  cash,  office  books  and  stationery, 
$21.45. 

Comment:  The  bill  will  be  found  in  the  envelope  marked  Incoming  Vouchers.  Observe 
that  the  terms  of  the  bill  are  net  cash.  This  means  that  the  business  is  not  entitled  to  a  dis- 
count, the  bill  being  due  and  payable  at  once.  Notice  that  the  bill  itself  has  been  receipted 
for  the  cash  payment.  This  is  done  by  writing  or  making  a  rubber-stamp  impression  on  the 
face  of  the  bill  similar  to  the  form  of  the  receipt  used  by  Johnson  &  Company  in  this  trans- 
action. The  usual  practice  is  to  receipt  the  bill  if  the  cash  has  been  received  at  the  time  the 
goods  are  billed.  After  you  have  made  your  entry,  file  the  bill,  face  outward,  in  the  envelope 
marked  Receipts  and  Paid  Bills,  directly  in  front  of  the  last  receipt. 

The  following  illustrates  the  form  of  a  receipted  biU. 


A  Receipted  Bill 


Illustration  102 


Philadelphia,  Pa.,_ 


October  4,      ^9 


JOHNSON  &  COMPANY 

BOOKS           STATIONERY 
3333  WILSON  AVENUE 
Sold  to       Henry  Bruce 


235  Adams  Street,    City 


Terms_J!etCash_ 


1  each     Cashbook,   Sales  Journal,    Purchases 
Journal,    Notes  Receivable  and  Notes 
Payable  book,    and  Ledger. 

Statements 

RECEIVED  PAYMENT 

October  4,    19 — 

JOHNSON  &  COMPANY 


17 


00 


45 


21 


45 


No.  6. — October  4.     Sold  to  Walter  Roberts  &  Co.,  Broad  and  Green  Sts.    City,  on 
account,  100  bu.  corn,  125  bu.  wheat. 


124 


BOOKKEEPING   FOR   MODERN   BUSINESS 


Comment:  A  bill,  containing  an  itemized  list  of  goods  sold,  should  be  mailed  or  handed 
to  the  customer  when  the  sale  is  made.  The  usual  practice  in  business  is  to  make  out  bills  in 
duplicate.  Instead  of  making  out  bills  singly  with  the  pen  or  typewriter  they  can  be  made  in 
duplicate  on  tiic  tyi)('wri{er  or  on  a  billing  machine  by  the  use  of  carbon  sheets. 

The  original  or  fiist  copy  of  the  l)ill  is  usually  mailed  or  handed  to  the  customer  and  the 
duphcate  copy  of  the  bill  is  filed  in  a  sales  binder  in  order  that  the  business  may  have  a  com- 
plete and  permanent  record  of  all  sales  made  by  the  business. 

An  entry  is  made  in  the  sales  journal  from  the  duplicate  copy  of  the  bill  in  this  set,  and 
after  the  serial  number  has  been  written  on  the  duplicate  bill,  it  is  filed  in  the  sales  binder. 

The  customer's  ledger  account  may  be  debited  directly  from  the  duplicate  bill  or  from 
the  record  in  the  sales  journal. 

Both  the  original  and  duplicate  copies  of  the  bill  must  be  exactl}'  alike.  The  writing 
may  be  done  with  ink,  pencil,  or  carbon.  By  the  use  of  carbon  sheet  and  a  lead  pencil,  two 
bills  can  be  filled  in  at  one  writing. 

Instructions:  A  duplicate  bill  for  this  transaction  will  be  found  in  the  envelope  marked 
Prepared  Papers.    Complete  the  bill  by  filling  in  the  unit  prices,  extensions,  and  total  amount. 

Copy  on  card  No.  6a  the  selling  price-list  assigned  you  Ijy  your  instructor  from  the 
numbered  lists  found  in  the  text-book  on  page  157.  It  will  be  necessary  for  you  to  adhere 
strictly  to  this  price-list  in  order  to  get  correct  results.  Do  not  compare  3'our  bills  with  those 
of  other  students  as  the  results  will  be  different. 

Detach  a  bill  from  the  pad  of  blank  bills  which  you  will  find  among  your  supplies,  and 
fill  it  in  exactly  like  the  following  illustration  if  the  first  price-list  has  been  assigned  to  you, 
otherwise  use  your  price-list  for  the  unit  prices. 


An  Original  Bill 


Illustration  103 


Xo.6                                                                                                           Sales  No.  1 

Philadelphia,  Pa.,                   October  4,      19 

HENRY  BRUCE 

DEALER  IN 

GRAIN    AND    FLOUR 

235  ADAMS  STREET 

Sold  to       Walter  Roberts  &  Company 

Broad  and  Green  Sts.,    City 

Terms      On  a/c . 

100  bu.    Corn                                                            1.62 

162 

GO 

125      "      Wheat                                                          1.78 

222 

50 

384 

50 

BOOKKEEPING   WITH   BUSINESS  PAPERS  125 

Review  your  multiplications  and  addition.  Remember  that  all  bills  sent  out  from  the 
office  must  be  correct.  If  the  bill  is  correct,  mail  the  original  copy  to  Walter  Roberts  &  Co. 
by  folding  it,  face  outward,  and  placing  it  in  the  envelope  marked  Outgoing  Papers. 

Make  an  entry  in  the  sales  journal  from  the  duplicate  bill,  entering  the  sales  number  1 
in  the  sales  number  column.     File  the  duplicate  bill  in  the  envelope  marked  Sales  Binder. 

No,  7.— October  5.  Bought  of  Walter  E.  Myers,  741  State  St.,  City,  on  account  at  30 
days,  merchandise  as  per  invoice. 

Instructions:  Take  the  invoice  from  the  envelope  marked  Incoming  Papers;  verify 
the  multiplications  and  addition;  and  if  they  are  correct,  0.  K.  the  invoice  as  instructed  in 
a  previous  transaction. 

Enter  and  file  the  invoice. 

No.  8.— October  5.     Sold  to  George  L.  Moore,  345  Lehigh  Ave.,  City,  on  account,  225 

bu.  barley,  225  bu.  rye. 

Instructions:  A  duplicate  bill  for  this  transaction  will  be  found  in  the  envelope  marked 
Prepared  Papers.  Complete  the  bill  by  filling  in  the  extensions  and  the  total  amount  as 
instructed  in  a  previous  transaction. 

Detach  a  bill  from  the  pad  of  blank  bills,  and  fill  it  in.  Review  your  multiplications  and 
addition.  IMail  the  original  copy  of  the  bill  to  George  L.  Moore  by  folding  it,  face  outward, 
and  placing  it  in  the  envelope  marked  Outgoing  Papers. 

Make  an  entry  in  the  sales  journal  from  the  duplicate  bill.  Since  this  is  the  second 
sale  of  merchandise  it  is  numbered  2.  Write  2  in  the  sales  nmnber  column  of  your  sales 
journal.     File  the  duphcate  bill  in  the  envelope  marked  Sales  Binder,  directly  in  front  of  the 

last  bill. 

No.  9.— October  5.     Mr.  Bruce  gave  W.  0.  Weaver  a  check  for  .SIOO.OO  to  apply  on 

account. 

Comment:  You  were  instructed,  at  the  beginning  of  this  series  of  transactions,  that  Mr. 
Bruce,  the  proprietor,  would  issue  all  checks  for  the  business.  In  the  above  transaction  Mr. 
Bruce  is  paying  out  a  part  of  the  money  which  he  has  deposited  in  the  bank  to  the  credit  of  the 
business. 

A  special  receipt  need  not  be  issued  or  received  by  the  business  when  money  is  received 
or  paid  out  by  check,  nor  is  it  necessary  to  have  the  original  bill  or  invoice  receipted  asinstructed 
in  transaction  No.  5.  The  canceled  check  is  coming  to  be  universally  regarded  as  a  sufficient 
receipt  not  only  by  business  firms  but  by  private  individuals  as  well. 

No.  10.— October  6.  Bought  of  C.  J.  Bowman  &  Co.,  1172  Union  Ave.,  City,  on  account, 
merchandise  as  per  invoice. 

Instructions:  Verify  and  check  the  invoice,  and  if  the  multipUcations  and  addition  are 
correct,  0.  K.  it.     Make  the  proper  entry  for  the  purchase  and  file  the  invoice. 

No.  11.— October  6.  Received  of  W^alter  Roberts  &  Co.,  then-  check  for  $200.00  to 
apply  on  the  bill  sold  them  on  the  4th. 

Comment:  The  check  received  from  Walter  Roberts  &  Co.,  in  the  above  transaction,  was 
deposited  in  the  bank  to  the  credit  of  the  business  by  Mr.  Bruce.  Do  not  issue  a  special 
receipt  for  the  cash  received  from  Walter  Roberts  &  Co.  The  canceled  check  will  be  a  suffi- 
cient receipt. 


126  BOOKKEEPING  FOli  MODERN  BC  SI  NESS 

No.  12. — October  8.  Sold  to  David  Lane,  1414  Jackson  St.,  City,  on  account  at  10 
days,  I'Ai)  bii.  wheat,  13.5  bu.  corn. 

Instructions:  Complete  the  duplicate  bill  and  verify  your  calculations.  Fill  in  and  mail 
the  original  copy  of  the  bill  to  David  Lane.  Make  the  sales  journal  entry  and  file  the  dupli- 
cate bill. 

Student's  Reports. — The  object  of  filling  in  these  reports  is  to  show  whether  the  files 
have  been  properly  kept,  the  cash  on  hand  correctly  proved,  and  the  papers  issued  and  received 
by  the  business  properly  verified. 

Report  No.  1. — Detach  a  report  blank  from  a  pad  found  in  your  business  forms  envelope 
and  write  your  name  at  the  top.  Fill  in  the  spaces  for  the  Report  Number  (Ij,  and  the  date 
(Oct.  8,  19 — )  in  the  proper  places. 

How  to  Fill  in  the  Report. — Cash. — Add  in  small  pencil  figures  the  cash  receipts  and  the 
cash  pa\'ments  sides  of  }our  cashbook.  Opposite  the  words  Cash  Receipts  of  the  report 
write  the  total  of  the  cash  receipts  in  the  amount  column.  Opposite  the  words  Cash  Pay- 
ments of  the  report  write  the  total  of  the  cash  payments  in  the  amount  column.  The  differ- 
ence between  the  total  cash  receipts  and  the  total'cash  payments  is  the  balance  of  the  cash  on 
hand. 

The  Cash  Proof. — Since  Henry  Bruce  receives  and  pays  out  all  the  cash  in  this  set  your 
instructor  will  verif}"  the  cash  for  you  when  you  present  your  report  for  examination  and 
approval. 

Papers  Issued. — List  in  each  report  all  papers  issued  since  October  1st.  Only  one  kind 
of  paper  has  been  issued  thus  far.  The  others  will  be  explained  when  they  have  been 
issued. 

The  bills  issued  by  the  business  will  be  found  in  the  envelope  marked  Outgoing  Papers. 
Count  them,  total  the  amounts,  and  write  the  number  and  the  sum  in  the  proper  columns. 

Condition  of  the  Files. — This  is  one  of  the  most  important  details  of  3'our  bookkeeping 
work.     The  report  will  show  whether  your  files  have  been  properly  kept. 

Invoices  Payable. — All  unpaid  invoices  are  kept  in  the  envelope  marked  Invoices  Payable. 
Count  them,  total  the  amounts  and  write  the  number  and  the  sum  in  the  proper  columns. 
When  invoices  are  paid,  they  should  be  taken  from  tlie  Invoices  Payable  envelope,  marked  or 
stamped  Paid,  and  placed  in  the  envelope  marked  Receipts  and  Paid  Bills. 

Duplicate  Sales. — Duplicates  of  all  bills  issued  to  our  customers  are  kept  in  the  envelope 
marked  Sales  Binder.  Count  them,  total  the  amounts,  and  write  the  number  and  the  sura 
in  the  proper  columns. 

Receipts. — Only  two  kinds  of  receipts  have  been  received  thus  far.  One  formal  receipt 
and  one  receipted  bill.  These  will  be  found  in  the  envelope  marked  Receipts  and  Paid  Bills. 
Write  the  number  and  the  total  of  the  amounts  in  the  proper  columns. 

These  are  the  only  results  required  in  the  first  report.  Present  your  report  to  your 
instructor  for  examination  and  aj^proval.  If  your  report  is  correct,  your  instructor  will  O.  K. 
it,  after  which  you  sh(ml(l  place  it  in  the  envelope  marked  Voucher  File. 

Post  the  transactions  from  the  purcliascs  journal,  the  sales  journal,  and  the  cashbook. 
Kulc  o\it  all  balancing  items  as  the  balancing  items  are  posted. 


BOOKKEEPING   WITH   BUSINESS  PAPERS  127 

Questions:  1.  Define  posting.  When  should  posting  be  done?  2.  What  is  an  invoice? 
A  bill?  3.  Name  the  different  kinds  of  receipts.  4.  How  should  you  proceed  with  an  invoice 
of  merchandise  received,  before  writing  0.  K.  upon  it?  5.  Why  is  it  unnecessary  to  itemize 
the  merchandise  purchased  in  the  purchases  journal?  6.  Why  should  a  receipt  be  taken  when 
cash  is  paid  for  any  purpose?  7.  When  is  it  not  necessary  to  take  a  receipt?  8.  What  is  the 
object  of  checking  the  postings,  and  when  should  it  be  done?  9.  Outline  the  procedure 
when  an  invoice  for  merchandise  purchased  is  received.     When  a  sale  is  made. 

No.  13. — October  9.  Received  from  George  L.  Moore,  his  note  at  10  days  in  payment 
of  biU  of  the  5th,  $571.50. 

Comment :  A  personal  account  in  the  ledger  represents  an  oral  or  implied  promise  to  pay, 
while  the  Notes  Receivable  account  in  the  ledger  represents  a  written  promise  to  pay. 

George  L,  Moore's  account  in  the  ledger  which  represents  the  amount  of  his  indebtedness 
to  the  business  will  now  be  transferred  from  his  personal  account  to  the  Notes  Receivable 
account.  It  should  be  understood  that  in  the  case  of  Mr.  Moore's  personal  account  there  is 
only  his  implied  promise  to  pay  the  amount  due,  while  the  Notes  Receivable  account  represents 
debts  owed  to  the  business  which  have  been  reduced  to  writing. 

Instructions :  The  note  which  the  business  received  from  George  L.  Moore  will  be  found 
in  the  envelope  marked  Incoming  Vouchers.  Examine  the  note  carefully  to  see  whether  it  is 
properly  filled  in. 

Turn  to  George  L.  Moore's  account  in  the  ledger  and  verify  the  amount  of  the  note  with 
his  ledger  account  before  making  the  entry  for  it.  If  you  find  the  amount  of  the  note  to  be 
correct  and  properly  filled  in,  make  an  entry  for  it  in  the  notes  receivable  book.  The  model 
notes  receivable  book.  Illustration  94  on  page  114,  contains  the  proper  entry  for  this  note 
with  the  exception  of  the  amount  (the  first  entry).  File  the  note  in  the  envelope  marked 
Notes  Receivable  File. 

No.  14.— October  9.  Sold  to  J.  M.  Freeman  &  Co.,  1143  Arch  St.,  City,  on  account,  110 
bu.  rye,  110  bu.  barley. 

Instructions :  Complete  the  duplicate  bill  and  verify  your  calculations.  Fill  in  and  mail 
the  original  copy  of  the  bill  to  J.  M.  Freeman  &  Co.  Make  the  sales  journal  entry  and  file  the 
duplicate  bill. 

No.  15. — October  9.     Sold  to  George  L.  Moore  on  account,  150  bu.  oats,  25  bbl.  flour. 

No.  16.— October  10.  Received  from  J.  M.  Freeman  &  Co.,  their  10-day  note  for  $100.00 
to  apply  on  bill  sold  them  on  the  9th. 

Instructions:  The  note  will  be  found  in  the  envelope  marked  Incoming  Vouchers. 
Examine  it  carefully  to  see  whether  it  is  correct. 

Make  an  entry  in  the  notes  receivable  book  for  the  note.  As  this  is  the  second  note 
received,  place  2  in  the  number  column.  File  the  note  in  the  envelope  marked  Notes  Receivable 
File. 

No.  17.— October  10.  Sold  to  J.  H.  Gilson  &  Co.,  1718  Adams  St.,  City,  140  bu.  corn, 
140  bu.  wheat,  terms  15-day  note. 

Instructions :  Complete  the  duplicate  bill  and  verify  your  calculations.  Fill  in  and  mail 
the  original  copy  of  the  bill  to  J.  H.  Gilson  &  Co.  Make  the  sales  journal  entry  writing  note 
15  days  for  the  terms;  file  the  duplicate  bill. 

Take  the  note  which  the  business  received  from  the  envelope  marked  Incoming  Vouchers. 


128  BOOKKEEPING  FOR   MODERN  BUSINESS 

The  amount  of  the  note  should  agree  with  the  amount  of  the  bill  which  you  entered  in  the 
sales  joiu-nal.  Examine  it  carefully  to  see  whether  the  amount  is  correct  and  the  note  properly 
filled  in. 

Make  an  entry  in  the  notes  receivable  book  for  the  note  following  the  instructions  pre- 
viously given  for  notes  received  by  the  business. 

No.  18.— October  11.  Bought  of  W.  0.  Weaver,  320  Market  St.,  City,  on  account, 
merchandise  as  per  invoice. 

No.  19. — Octol)er  12.  Gave  A.  H.  Wilson  a  10-day  note  for  $930.00  in  payment  of  invoice 
of  the  3d. 

Comment :  A  personal  account  in  the  ledger  represents  an  oral  or  implied  promise  to 
pay,  while  the  Notes  Payable  account  in  the  ledger  represents  our  written  promise  to  pay. 

A.  H.  Wilson's  account  in  the  ledger  which  represents  the  amount  of  our  indebtedness  to 
him  will  now  be  transferred  from  his  personal  account  to  the  Notes  Payable  account.  It 
should  be  understood  that  in  the  case  of  A.  H.  Wilson's  personal  account  there  is  the  implied 
promise  only  of  the  business  to  pay  the  amount  due,  while  the  Notes  Payable  account  represents 
its  written  promise  to  pay. 

Instructions:  The  note  which  the  business  issued  to  A.  H.  Wilson  will  be  found  in  the 
envelope  marked  Prepared  Papers.  Examine  it  carefully  to  see  whether  Air.  Bruce  filled 
it  in  properlj'. 

Turn  to  A.  H.  Wilson's  account  in  the  ledger  and  verify  the  amount  of  the  note  with  his 
ledger  account  before  making  the  entry  for  it.  If  you  find  the  amount  of  the  note  to  be  correct 
and  properly  filled  in,  make  an  entry  for  it  in  the  notes  payable  book.  The  model  notes  payable 
book,  Illustration  99,  contains  the  proper  entry  for  this  note  with  the  exception  of  the  amount 
(the  first  entry).  File  the  note  in  the  envelope  marked  Notes  Payable.  Take  the  invoice 
from  the  Invoices  Payable  file  and  mark  it  paid  by  writing  Paid— 10-day  note — W '12/19 — 
upon  it.     File  the  invoice  in  the  envelope  marked  Receipts  and  Paid  Bills. 

No.  20.— October  13.  Gave  C.  J.  Bowman  &  Co.  a  10-day  note  for  SoOO.OO  in  part 
payment  of  invoice  of  the  6th. 

Instructions:  The  note  will  be  found  in  the  envelope  marked  Prepared  Papers. 
Examine  it  carefully  to  see  whether  Mr.  Bruce  filled  it  in  properly.  Follow  the  instructions 
given  in  transaction  No.  19  for  making  the  notes  payable  book  entry.  File  the  note  as  pre- 
viously instructed. 

No.  21.— October  13.  Sold  to  Charles  Smith  &  Co.,  927  Federal  St.,  City,  on  account, 
95  bu.  rye,  95  bu.  barley. 

No.  22.— October  15.  Bought  of  A.  H.  Wilson,  3451  Walnut  St.,  City,  merchandise  as 
per 'invoice.     Terms,  20-day  note. 

Instructions:  Take  the  invoice  from  the  envelope  marked  Incoming  Vouchers;  verify  the 
nuiUii)licalioMs  and  addition:  O.  K.  the  invoice;  make  the  proper  entry;  and  file  the  invoice. 

The  note  will  be  found  in  the  envelope  marked  Prepared  Papers.  Examine  it  carefully 
to  see  whether  Mr.  Bruce  filled  it  in  properly.  Make  an  entry  in  tlu>  notes  payable  book  and 
file  the  note. 

No.  23.— October  15.  Gave  C.  J.  Bowman  &  Co.  a  check  for  $200.00  to  apply  on 
account. 


BOOKKEEPING   WITH  BUSINESS  PAPERS 


129 


No.  24. — October  16.  Received  from  J.  M.  Freeman  &  Co.  their  check  for  S179.40  in 
full  of  account. 

Report  No.  2. — Detach  a  report  blank  from  the  pad  of  report  blanks  found  in  your 
business  forms  envelope,  and  fill  it  in,  following  the  instructions  given  for  Report  No.  1,  The 
report  on  Papers  Issued  will  include  all  papers  issued  since  October  1st.  The  report  on  the 
Condition  of  Files  will  show  the  condition  of  the  files  as  they  now  stand. 

Two  new  files  are  used  for  the  Notes  Receivable  and  the  Notes  Payable.  Count  the 
notes,  total  the  amounts,  and  write  the  number  and  the  sum  in  the  proper  columns.  Observe 
that  one  invoice  has  been  paid.  Be  sure  that  it  has  been  marked  Paid  and  placed  in  the 
envelope  marked  Receipts  and  Paid  Bills. 

Present  your  report  to  your  instructor  for  examination  and  approval. 

Post  the  transactions  from  the  purchases  journal,  the  sales  journal,  and  the  cashbook. 
Rule  out  all  balancing  items  as  the  balancing  items  are  posted. 

In  posting  from  the  notes  receivable  book,  all  items  entered  in  the  Account  Credited  column 
are  posted  to  the  credit  side  of  their  respective  accounts.  An  entry  in  the  Account  Credited 
column  of  the  notes  receivable  book  indicates  that  the  Notes  Receivable  account  is  to  be 
■debited  and  the  account  named  is  to  be  credited.  Post  the  $571.50,  the  face  value  of  the  note 
received  from  George  L.  Moore,  to  the  credit  side  of  George  L.  Moore 's  account  in  the  ledger. 
Postmark  your  entries. 

The  following  illustrates  the  form  of  your  record  after  you  have  posted  and  ruled  George 
L.  Moore's  account. 

Illustration  104 


JA^SU^ 


>^^e<?^l^.^Z^//lc^tyU^ 


K.,y€^€n^ 


J 


C^'-yiy  '^c' 


J 


I2L 


5a 


f 


/^7^^/^<sz^  y^^ 


-^ 


/  so 


Next  post  the  $100.00  which  is  the  face  value  of  the  note  received  from  J.  M.  Freeman 
<fe  Co.,  to  the  credit  side  of  J.  M.  Freeman  &  Co.'s  account  in  the  ledger  making  the  entry 
in  the  exact  order  as  previously  instructed.     Postmark  the  entries. 

Follow  the  same  instructions  for  posting  the  amount  of  the  note  which  you  received  from 
J.  H.  Gilson  &  Co.  to  their  account  in  the  ledger. 

In  posting  from  the  notes  payable  book,  all  items  entered  in  the  Account  Debited  column 
are  posted  to  the  debit  side  of  their  respective  accounts.  An  entry  in  the  Account  Debited 
column  of  the  notes  payal)le  book  indicates  that  the  Notes  Payable  account  is  to  be  credited 
and  the  account  named  is  to  be  debited.  Post  the  $930.00  which  is  the  face  value  of  the  note 
given  or  issued  to  A.  H.  Wilson  to  the  debit  side  of  A.  H.  Wilson's  account  in  the  ledger. 
Postmark  the  entries. 

The  following  illustrates  the  form  of  your  record  after  you  have  posted  and  ruled  A.  H. 
Wilson's  account: 


130 

Illustration  105 


BOOKKEEPING   FOR   MODERN  B(\SINESS 


jA<s/  '^^^kA,^^ 


a'^/'vh.A^ 


Q/:, 


^ 


-n^ 


a^ 


V^e^ytPa^        9lP 


^JC 


06^ 


a^ 


a., 


'/Oi^       /^ 


^JC 


0(P 


Next  post  the  S500.00  which  is  the  face  value  of  the  note  given  or  issued  to  C.  J.  Bowman 
k  Co.  to  the  debit  side  of  C.  J.  Bowman  &  Co.'s  account  in  the  ledger  making  the  entry  in  the 
exact  order  as  previous}}^  instructed.     Postmark  the  entries. 

Follow  the  same  instructions  for  posting  the  amount  of  the  note  which  you  issued  to  A.  H. 
Wilson  on  the  15th. 

Questions:  1.  Give  the  functions  of  the  Notes  Receivable  account.  The  Notes  Payable 
account.  2.  When  is  the  Notes  Payable  account  credited?  When  debited?  3.  When  is  the 
Notes  Receivable  account  debited?  When  credited?  4.  What  does  the  abbreviation  A'.  R. 
in  the  lodger  account  mean?  N.  P.?  5.  Define  assets;  liabilities.  6.  Is  the  Notes 
Receivable  account  an  asset  or  liability  account?  The  Notes  Payable  account?  7.  Name 
other  asset  accounts.  8.  Name  and  define  the  parties  to  a  note.  9.  Distinguish  between 
notes  receivable  and  notes  paj'able. 

No.  25. — October  18.  Received  of  David  Lane  his  15-day  note  for  S200.00  to  apply  on 
account. 

Instructions:  Take  the  note  from  the  envelope  marked  Incoming  Vouchers.  Examine  it 
carefull}-  to  see  whether  it  is  properly  filled  in.     Enter  and  file  the  note. 

No.  26.— October  18.     Received  from  David  Lane  his  check  for  S2G0.00  in  full  of  account. 

No.  27.— October  18.     George  L.  Moore  paid  his  note  by  check,  $571.50. 

Instructions :  It  is  customary  to  write  or  stamp  Paid  together  with  the  date  across  the 
face  of  a  note  before  returning  it  to  the  maker.  Take  the  note  from  the  envelope  marked 
Notes  Receivable,  write  Paid  Oct.  18,  19 —  across  its  face,  and  have  your  teacher,  representing 
Mr.  Bruce,  sign  it. 

In  the  above  transaction  Mr.  Moore  has  paid  his  written  obligation  to  the  business. 
vSince  the  Notes  Receivable  account  is  debited  when  written  ol)ligations  of  others  are  received, 
it  follows  that  the  Notes  Receivable  account  must  be  credited  when  these  notes  are  paid. 

Make  an  entry  for  the  note  on  the  cash  receipts  side  of  the  cashbook  as  follows: 

Illustration  106 


/r 


y2c?^S^/{II^ti;^-<>2>w^i^2^ 


>S^.^  y^/^e^iPd^y^t^i^^ 


/^/•r 


jry/ 


s^ 


Turn  to  your  notes  receivable  book  and  write  Paid  10 '18 '19 —  in  the  Remarks  column. 
Return  the  canceled  note  to  George  L.  Moore  by  placing  it  in  the  envelope  marked  Outgoing 
Papers. 


BOOKKEEPING  WITH  BUSINESS  PAPERS 


131 


No.  28.— October  19.  Sold  to  J.  M.  Freeman  &  Co.,  1143  Arch  St.,  City,  on  account,  60 
bbl.  flour,  155  bu.  oats. 

No.  29.— October  20.     J.  M.  Freeman  &  Co.  paid  their  note  due  to-day  by  check,  $100.00. 

Instructions:  Take  the  note  from  the  envelope  marked  Notes  Receivable,  mark  it 
paid;  make  the  proper  entries  for  it  in  both  the  cashbook  and  notes  receivable  book;  return 
the  canceled  note  to  J.  M.  Freeman  &  Co. 

No.  30. — October  21.  Received  of  Charles  Smith  &  Co.  their  check  for  .S75.00  to  apply 
on  account. 

No.  31. — October  22.  The  business  paid  its  note  in  favor  of  A.  H.  Wilson  due  to-day, 
$930.00. 

Instructions:  Receive  the  note  from  A.  H.  Wilson  by  removing  it  from  the  envelope 
marked  Notes  Payable.  Write  Paid,  October  22,  19 —  across  the  face  of  the  note,  and  ask  your 
teacher,  representing  A.  H.  Wilson,  to  sign  it. 

In  the  above  transaction  the  business  has  paid  its  written  obligation  to  A.  H.  Wilson. 
Since  written  obligations  of  the  business  are  entered  as  Notes  Payable  when  they  are  issued, 
it  follows  that  they  must  be  entered  in  the  cashbook  as  Notes  Payable  when  they  are  paid. 

Make  an  entry  for  the  note  on  the  cash  payments  side  of  the  cashbook  as  follows: 

Illustration  107 


22 


(^  /i( /zZ^^^i-<'^K^£yyi<^ 


/o/y2 


fjip 


0(P 


Turn  to  your  notes  payable  book  and  write  Paid  10/22/19 —  in  the  Remarks  column. 
File  the  canceled  note  in  the  envelope  marked  Receipts  and  Paid  Bills. 

No.  32. — October  23.  Sold  to  J.  H.  Gilson  &  Co.,  1718  Adams  St.,  City,  on  account, 
75  bbl.  flom-,  50  bu.  wheat. 

No.  33. — October  23.  The  business  paid  its  note  in  favor  of  C.  J.  Bowman  &  Co.,  due 
to-day,  $500.00. 

Instructions:  Take  the  note  from  the  envelope  marked  Notes  Payable.  Mark  it 
paid;   enter  and  file  the  canceled  note. 

No.  34.— October  24.  Paid  W.  0.  Weaver  $854.50  by  check  for  the  balance  of  their 
invoice  of  the  3d. 

Mark  the  invoice  Paid  and  file  it  as  previously  instructed. 

No.  35.— October  25.  Received  from  J.  H.  Gilson  &  Co.,  their  check  for  $476.00  in 
payment  of  their  note  due  to-day. 

No.  36. — October  26.  Sold  to  David  Lane,  1414  Jackson  St.,  City,  terms,  15-day  note, 
125  bu.  barley,  125  bu.  rye. 

Instructions:  Mail  the  original  bill  to  David  Lane  and  file  the  duplicate  after  making 
your  entry.  The  amount  of  the  note  should  be  the  same  as  the  amount  of  the  bill.  Make  an 
entry  for  the  note  and  file  it. 

No.  37.— October  27.  Received  of  J.  H.  Gilson  &  Co.,  their  check  for  $225.00  to  apply 
on  account. 


132  BOOKKEEPING  FOR  MODERN  BUSINESS 

No.  38.— October  28.  Bought  of  Walter  E.  Myers,  741  State  St.,  City,  terms,  lo-day 
note,  merchandise  as  per  invoice. 

No.  39.— October  29.  Received  of  Charles  Smith  &  Co.,  their  check  for  S166.70  for 
balance  of  bill  of  the  13th. 

No.  40. — October  30.     Paid  C.  J.  Bowman  &  Co.,  $150.00  by  check  to  apply  on  accomit. 

No.  41. — October  31.     Mr.  Bruce  paid  }ou,  the  student,  cash  .^GO.OO,  October  salarJ^ 

Report  No.  3. — Detach  the  report  blank  from  the  pad  found  in  your  business  forms  enve- 
lope, fill  it  in,  following  the  instructions  previously  given.  The  report  on  Papers  Issued  will 
include  all  papers  issued  since  October  1st.  The  report  on  the  Condition  of  Files  will  show 
the  condition  of  the  files  as  they  now  stand. 

Posting. — Post  the  remaining  entries  in  your  sales  journal,  purchases  journal,  notes 
receivable  book,  notes  payable  book  and  cashbook. 

Foot  the  columns  of  your  cashljook  as  previously  instructed.  If  your  work  is  correct, 
the  debit  footing  should  be  $5,753.60,  and  the  credit  footing  should  be  $2,865.95.  Post  these 
items  to  the  Cash  account.  Balance  and  rule  the  cashbook.  After  posting  and  closing  the 
cashbook,  check  each  item  posted  to  the  ledger  to  see  that  no  errors  have  been  made. 

Foot  the  sales  journal.  If  your  work  is  correct,  the  amount  should  be  $4,982.45  for  the 
first  price  list.  Have  your  instructor  verify  your  result  if  another  price  list  has  been  assigned 
to  you.  Make  the  closing  entry  and  rule  the  sales  journal.  After  posting,  check  each  item 
posted  to  the  lodger  to  see  that  no  errors  have  been  made. 

Foot  the  purchases  journal.  If  your  work  is  correct,  the  amount  should  be  $5,922.50. 
Make  the  closing  entry  and  rule  the  purchases  journal.  After  posting,  check  each  item  posted 
to  the  ledger. 

The  sum  of  all  the  notes  received  by  the  business  during  the  month  should  })e  $1,665.00. 
If  you  find  your  work  to  be  correct,  rule  and  foot  the  amount  column,  and  write  Notes 
Receivable  Debited  as  shown  in  the  model  notes  receivable  book  on  page  115. 

Post  the  total  amount  of  the  notes  received  to  the  debit  side  of  the  Notes  Receivable 
account  in  the  ledger.     Postmark  the  entries. 

Check  the  items  posted  from  the  notes  receivable  book  with  the  items  entered  in  the 
ledger  accounts  by  placing  a  hght  pencil  check  mark,  thus  (V),  on  the  double  vertical  lines 
just  to  the  left  of  the  amount  in  the  ledger  account  and  check  the  entry  in  the  notes  receivable 
book,  thus  (V),  just  to  the  left  of  the  amount  as  previously  instructed  when  checking  your 
other  records. 

The  sum  of  all  notes  issued  by  the  business  during  the  month  should  1)0  $2,580.00.  If 
you  find  your  work  to  be  correct,  rule  and  foot  the  amount  column,  and  write  Notes  Payable 
Credited  as  shown  in  the  model  notes  payable  book  on  page  119. 

Post  the  total  amount  of  the  notes  issued  to  the  credit  side  of  the  Notes  Payable  account. 
Postmark  the  entries. 

Check  the  items  posted  from  the  no<(>s  payable  book  with  the  items  entered  in  the 
ledger  accounts  following  the  instructions  given  for  chocking  the  notes  recoivablo  l)Ook. 

Take  a  trial  balance  of  your  ledger  since  you  have  not  only  jiosted  the  daily  transactions 
but  the  totals  of  the  various  books  as  well.  Proceed  to  prepare  the  trial  balance  as  previously 
instructed.     Have  your  trial  balance  approved  before  proceeding  further. 


BOOKKEEPING   WITH   BUSINESS  PAPERS 


133 


Illustration  108 


STATEMENT 


FOLIO. 


M. 


-2^2.19- 


^<^^ 


'^^Ayf7->f^ 


yu/.,AA^y/7^. 


In  account  with  HENRY    BRUCE 
235  ADAMS  STREET 


2^ 


Balince 


Mdse.  per  bill  rendered 


7.^2 


■y^ 


a.T/? 


l2. 


Statement  of  Customer's 
Account. — This  is  a  copy  of  a 
customer's  account  as  it  appears 
on  our  ledger.  It  is  a  common 
practice  to  render  a  statement, 
at  the  close  of  each  month,  to 
each  customer  showing  the  con- 
dition of  his  account  as  it  appears 
on  our  books.  The  statement 
should  show  the  balance,  if  any, 
of  the  previous  month's  state- 
ment, the  date  of  each  bill  ren- 
dered and  any  special  terms 
indicated  on  it,  the  date  and  the 
amount  of  each  credit  accepted 
on  account,  and  the  balance  due 
at  the  end  of  the  month.  The 
balance  as  shown  by  the  state- 
ment should  be  the  same  as  the 
balance  of  the  customer's  account 
on  our  ledger. 

The  statement  affords  the  customer  an  opportunity  to  compare  his  account  with  our 
records,  and  correct  any  difference  which  may  exist  between  his  books  and  ours.     Such  a 

statement  also  calls  the  attention 
of  the  customer  to  bills  as  they 
fall  due  and  thus  may  be  con- 
sidered as  a  request  for  the 
prompt  payment  of  amounts 
which  are  due  or  past  due. 

Statements  which  are  paid 
in  full  should  be  receipted  by 
writing  or  making  a  rubber- 
stamp  impression  on  the  face  of 
the  statement  similar  to  the  form 
of  the  receipt  in  Illustration  101 ; 
partial  payments  should  be  in- 
dicated only  by  the  date  and  the 
amount  as  shown  in  the  model 
statements. 

Since  statements  are  pre- 
pared entirely  from  the  ledger 
accounts,  it  follows  that  all 
posting  must  be  completed 


Illustration  109 

STATEMENT 

- 

V0\A0/<C2 

^Jt^ 

/ 

(  .-AjC^,f^A!<:>^2^^y   (  Jl 

1 

m  account  with  HENRY  BRUCE 

235  ADAMS  STREET 

.jr^Uyfziy^ 

/ 

Balance 

/  /.O 

7^ 

70 

Mdse.  per  bill  rendered                   ^f 

.10^ 

yr 

^ 

■ — 1— 

134 


BOUKKEEl'L\(J   FOR   MODERN   BUSINESS 


Illustration  110 


STATEMENT 


FOLIO. 


M_ 


c^.  A^Jjf^^.^^. 


^^.SrPjq       ' 


T 


L  ^^.-'>^^^..^^_  "/Zy. 


In  accoun.  j^th   HENRY    BRUCE 
235  ADAMS  STREET 


ie^-^fi^ 


Z^ 


Hdse  per  bill  rendered 


n 


..^^ 


X  Jy  .'>i,T,<lCi^^y>jJ^^yf,^j'..<^ 


■^-^-^ 


■^ 


2J- 


y^o 


UJ- 


before    they    can    be    made 
out. 

No.  42.— Check  the  state- 
ments which  were  received  from 
W.  0.  Weaver,  Walter  E.  Myers, 
and  C.  J.  Bowman  &  Co.  with 
their  ledger  accounts. 

Turn  to  W.  0.  Weaver's 
account  in  your  ledger  and  check 
the  statement  which  you  received 
from  him  with  his  ledger  account. 
This  affords  you  an  opportunity 
to  compare  your  account  with  his 
records,  and  correct  any  differ- 
ence which  may  exist  between 
your  books  and  his.  Observe 
carefully  whether  the  balance  as 
shown  by  the  statement  is  due 
or  past  due.  Study  the  form 
carefull}^,  in  all  its  details. 

Turn  to  Walter  E.  Myers' 

and  C.  J.  Bowman  &  Co.'s  accounts  and  check  their  statements  with  your  ledger  accounts. 

Correct  any  difference  which  may  exist  between  your  books  and  theirs.     Studj'  the  forms 

carefully.    File  the  statements  in         illustration  in 

the    envelope    marked    Voucher 

File. 

No.  43. — Prepare  statements 

of    accounts  for    all    customers 

who  owe  you  a  balance. 

Turn  to  Walter  Roberts  & 

Co.'s  account  in  your  ledger,  and 

from  it  prepare  a  statement  like 

the  model  statement  of  James  H. 

Dodds. 

Prepare    similar   statements 

for  all   others  who   owe   you   a 

balance.     Place  tlu^n  in  properly 

addressed    envelopes    and    hand 

thcin  to  your  instructor  for  ex- 
amination and  approval. 

The   Statements. —  Thus  far 

5'ou  have  been   classifying  l)usi- 

ness   transactions  and    recording 


BOOKKEEPING   WITH   BUSINESS  PAPERS  135 

them  in  their  proper  ledger  accounts.  At  the  end  of  the  month  you  were  instructed  to  prove 
your  work  by  checking  j^our  postings  and  taking  a  trial  balance  of  the  ledger  to  ascertain 
whether  the  debit  and  credit  sides  were  equal. 

In  addition  to  classifying  and  recording  the  transactions,  the  bookkeeper  is  often  asked 
to  submit  to  the  proprietor,  at  the  end  of  the  year  or  other  business  period,  detailed  statements 
showing  the  result  and  the  condition  of  the  business. 

In  order  that  you  may  understand  clearly  the  building  of  these  statements  and  the  object 
of  making  them,  it  is  necessary  for  you  to  review  some  of  the  bookkeeping  terms  already  given 
and  study  others  used  in  the  building  of  the  statements. 

Accoimts  Classified. — Accounts  in  the  ledger  are  of  two  classes,  namely,  financial  accounts 
and  profit  and  loss  accounts. 

Before  explaining  the  term  financial  account  it  is  necessary  to  review  again  the  definitions 
of  asset  and  liability. 

An  asset  or  resource  is  anything  of  value  belonging  to  the  business,  or  amounts  due  the 
business  from  others,  that  is,  what  the  business  owns. 

A  liability  is  what  the  business  owes,  that  is,  the  debts  and  obhgations  of  the  business. 

A  financial  account  is  one  which  shows  by  its  result  whether  it  is  an  asset  or  a  liability  to 
the  business. 

If  the  debit  side  of  a  financial  account  has  the  larger  amount,  it  is  an  asset  account;  if 
the  credit  side  has  the  larger  amount,  it  is  a  Uabilitj^  account.  The  financial  accounts  used 
thus  far  are  the  Cash  account,  the  Personal  accounts,  the  Notes  Receivable  account,  and  the 
Notes  Payable  account. 

Before  explaining  the  term  Profit  and  Loss  account,  it  is  necessary  to  define  profit  and  loss. 

Profit  is  an  increase  in  the  value  of  property  or  an  excess  of  the  amount  received  for 
merchandise  over  the  purchase  price. 

Loss  is  a  decrease  in  the  value  of  property  or  an  excess  of  cost  over  selling  price.  The 
term  Loss  is  also  appHed  to  any  item  of  expense  necessary  to  carry  on  the  business. 

Profit  and  loss  accounts  are  those  which  show  by  their  results  either  a  profit  or  a  loss. 

If  the  debit  side  of  a  profit  and  loss  account  shows  the  larger  amount,  it  is  a  loss  account; 
if  the  credit  side  is  the  larger  amount,  it  is  a  profit  account.  The  profit  and  loss  accounts  used 
thus  far  are  the  merchandise  accounts,  namely,  Merchandise  Purchases  and  Merchandise 
Sales,  and  the  General  Expense  account. 

Summary. — An  account  which  shows  by  its  result  a  debit  balance,  therefore,  represents 
either  an  asset  or  a  loss.  If  the  balance  denotes  something  of  value  belonging  to  the  business 
it  is  an  asset;  otherwise  it  is  a  loss. 

An  account  which  shows  by  its  result  a  credit  balance,  therefore,  represents  either  a 
liability  or  a  profit.  If  the  balance  represents  an  amount  which  the  business  owes  it  is  a 
liability;  otherwise  it  is  a  profit. 

Assets  are  always  debits;  liabilities  are  always  credits. 

Losses  are  always  debits;  profits  are  always  credits. 

Statements  Classified. — The  principal  statements  prepared  at  the  end  of  a  business  period 
are  the  Profit  and  Loss  Statement  and  the  Balance  Sheet  or  Financial  Statement. 


136 


BOOKKEEPING  FOR   MODERN  BUSINESS 


The  Profit  and  Loss  Statement,  i.  e.,  a  summary  of  all  the  profit  and  loss  accounts,  con- 
sists then  of  u  list  of  all  the  profits  and  losses  of  the  business,  prepared  for  the  purpose  of 
sliowing  the  result  of  the  business  for  the  period  ending  at  the  time  the  statement  is  taken. 

The  Balance  Sheet  or  Financial  Statement,  i.  e.,  a  summary  of  all  financial  accounts, 
consists  then  of  a  list  of  all  the  assets  and  liabilities  of  the  business,  prepared  for  the  purpose  of 
showing  the  condition  of  the  business  at  the  time  the  statement  is  taken. 

Analysis  of  the  Trial  Balance. — Since  the  trial  balance  is  a  hst  or  schedule  of  the  debit  and 
credit  balances  of  all  accounts  remaining  open  in  the  ledger  at  any  specified  time,  it  forms  the 
basis  for  all  statement  work. 

The  accounts  in  the  trial  balance  should,  therefore,  be  analyzed,  each  account  being 
designated  in  such  a  manner  as  to  indicate  whether  the  account  is  an  asset,  a  liability,  a  profit^ 
a  loss,  or  an  account  necessary  to  determine  the  result  of  the  Merchandise  Trading  account. 
This  may  be  done  by  placing  to  the  left  of  the  folio  column,  on  the  line  with  the  account,  an 
abbreviation  indicating  what  the  account  represents  as  shown  in  the  following  illustration  of  a 
trial  balance. 


Illustration  112 


•^^I'i^-tz^^  /^^h;z^c<z^-y-t^c,c^  i.A^i>£^?l^-£yly  J^ /,  /^~ 


My 
My 

a 

a 


yxyy  x  x 


y  xxX 


X  XX 
XXX 

XXX 
XXX 

XXX 


xyyxx 


XX 


XX 
XX 
XX 
XX 


xxxx 


XXX 

XXX 

.XXX 


XX 
XX 


XX 
XX 
XX 


X  X 


BOOKKEEPING  WITH   BUSINESS  PAPERS 


137 


The  Merchandise  Inventory. — Before  the  profit  and  loss  statement  can  be  prepared  it 
will  be  necessary  to  calculate  the  value,  usually  at  cost  price,  of  all  merchandise  on  hand. 

The  student,  by  making  an  actual  count  of  all  the  unsold  merchandise  on  hand  October 
31,  19 — ,  finds  he  has  the  following  merchandise: 
145  bu.  barley  purchased  at  SI. 05  per  bu. 
10  bu.  clover  seed  purchased  at  $14.50  per  bu. 
135  bu.  corn  purchased  at  $1.45  per  bu. 
40  bbl.  flour  purchased  at  $10.60  per  bbl. 
195  bu.  oats  purchased  at  64yf  per  bu. 
120  bu.  rye  purchased  at  $1.20  per  bu. 

15  bu.  timothy  seed  purchased  at  $7.50  per  bu. 
120  bu.  wheat  purchased  at  $1.65  per  bu. 

Make  a  record  showing  the  value  of  the  unsold  merchandise  in  the  inventory  book 
similarly  to  the  form  shown  in  Illustration  17. 

The  Profit  and  Loss  Statement 

The  object  of  preparing  the  profit  and  loss  statement  is  to  show  the  result  of  the  business, 
that  is,  the  amount  of  profit  or  loss  during  a  business  period. 

The  profit  and  loss  statement  is  prepared  at  the  end  of  a  business  period,  namely,  monthly, 
quarterly,  semi-yearly,  or  yearly.  The  heading  of  the  profit  and  loss  statement  should  always, 
show  the  period  covered  as  shown  in  the  following  illustration.     (The  first  price  list.) 

Illustration  113 


ts'^LyC'd'lP^^i'CyC^-  — 


c*.^;*^ 


/  ■       / 


Sf2  2 


SO 
JO 


'/fJ^2 


^•S 


U^2i, 


SSC 


/J/ 


4/2V 


2^ 


i^S 


rc^ 


138  BOOKKEEPING  FOR  MODERN  BUSINESS 

Analysis  of  the  Profit  and  Loss  Statement: 

^Moichandise  sales  represents  the  net  returns  from  merehandisc  sold. 

^lerchandise  purchases  represents  the  net  cost  of  merchandise  bought. 

Merchandise  inventory  represents  the  value  of  all  unsold  merchandise  on  hand,  calculated 
at  cost  price. 

Cost  of  goods  sold  is  the  result  obtained  by  deducting  the  value  of  the  merchandise  inven- 
tory from  the  net  cost  of  merchandise  purchased. 

Gross  profit  on  sales  is  the  result  obtained  by  deducting  the  cost  of  merchandise  sold  from 
the  net  sales. 

General  Expense  represents  the  cost  of  conducting  the  business. 

Net  profit  as  shown  by  the  profit  and  loss  statement  represents  the  increase  in  value  of  the 
business  during  the  business  period. 

Instructions:  Prepare  the  profit  and  loss  statement  for  the  business  period  ending 
October  31,  19 — ,  and  submit  it  to  your  instructor  for  examination  and  approval. 

Comment:  The  profit  and  loss  statement  is  only  an  arithmetical  proposition  arranged  in 
an  orderly  form.  If  all  the  merchandise  purchased  had  been  sold,  the  only  calculation  neces- 
sary to  find  the  gross  profit  on  merchandise  sold  would  have  been  to  find  the  difference  between 
the  cost  of  merchandise  purchased  and  the  net  returns  from  sales.  But  since  only  a  part  of  the 
merchandise  purchased  was  sold  it  was  necessary,  therefore,  to  find  the  cost  of  merchandise 
sold  l)y  dc^ducting  the  merchandise  inventory  from  the  merchandise  purchases.  When  the 
returns  from  merchandise  sold  is  more  than  the  cost  of  merchandise  sales,  it  shows  a  gross 
profit  on  merchandise. 

Closing  the  Ledger. — The  profit  and  loss  statement  which  you  have  just  prepared  has 
been  approved  by  Mr.  Bruce.  Entries  should  now  be  made  in  the  journal  which  will,  when 
posted  to  the  ledger,  close  the  profit  and  loss  accounts  because  they  have  served  their  purpose. 
It  consists,  essentially,  of  transferring  the  profits  and  losses  as  shown  by  the  various  accounts 
to  the  summary  Profit  and  Loss  account.  The  net  profit  or  loss  is  in  turn  transferred  into  the 
Proprietor's  capital  account.     This  process  is  called  closing  the  ledger. 

The  object  of  closing  the  ledger  is  to  provide  a  permanent  record  showing  the  result  and 
condition  of  the  business  as  shown  by  the  profit  and  loss  statement  and  the  balance  sheet 
at  the  close  of  the  business  period. 

Two  Methods  of  Closing  the  Ledger. — Two  general  methods  are  used  in  closing  the  ledger 
accounts,  the  journal  method  and  the  direct  method  (fully  explained  in  Illustration  208). 
The  journal  method  is  explained  and  illustrated  in  the  following  exercises. 

In  the  journal  method  of  closing,  the  accounts  are  classified  in  the  journal  and  posted  to 
the  proper  ledger  accounts.  The  closing  journal  entries  should  contain  the  facts  as  set  forth 
in  the  various  steps  of  the  profit  and  loss  statement. 

Additional  Accounts  Used  in  Closing  the  Ledger. — Three  additional  accounts,  not  used 
thus  far  in  this  set,  will  l>e  used  in  closing  the  ledger,  namely, — a  Merchandise  Trading  account, 
a  Mcrciiandise  Inventory  account,  and  a  Profit  and  Loss  account.  Thc^si^  accounts  have  been 
explained  in  the  first  part  of  the  text.  It  is  advisable  to  have  the  profit  and  loss  statement 
before  you  for  reference  while  closing  the  ledger. 


BOOKKEEPING   WITH  BUSINESS  PAPERS 


139 


Closing  the  Merchandise  Accounts  into  the  Merchandise  Trading  Account. — The  results 
of  the  three  merchandise  accounts  (the  Merchandise  Purchases  account  which  represents  the 
cost  of  goods  bought,  the  Merchandise  Sales  account  which  represents  the  returns  from 
sales,  and  the  Merchandise  Inventory  account  which  represents  the  cost  or  value  of  the  unsold 
merchandise  on  hand  at  the  close  of  September)  which  were  affected  by  the  buying  and  the 
selling  of  merchandise  are  assembled  into  a  Merchandise  Trading  account  in  order  to  show  the 
gross  trading  profit  in  the  ledger  in  permanent  form. 

The  first  step  to  be  taken  in  closing  the  ledger  is  to  transfer  the  value  of  the  merchandise 
sales,  $4,982.45  (the  first  price  list),  as  shown  in  the  IVIerchandise  Sales  account  to  the 
Merchandise  Trading  account  in  order  to  close  the  Merchandise  Sales  account  and  transfer  the 
net  returns  from  sales  to  the  Merchandise  Trading  account.  This  is  done  by  making  the 
following  journal  entry: 

Illustration  114 


7/ 


7' 


---iSi'C'Oep-t'C'^^.  < 


^fr2 


^s 


^fr2 


^s 


Post  the  journal  entry  to  the  proper  ledger  accounts  under  date  of  October  31st.     The 
result  of  this  journal  entry  closes  the  Merchandise  Sales  account  and  credits  the  Merchandise 
Trading  account  as  shown  by  the  following  illustrations: 
Illustration  115 


Q^. 


J/ 


H'.£fr2 


OOr 


3/ 


/J^«^;^ri^;w£^      >J^' 


■^arz  •  ^jT. 


Illustration  116 


nur 


J/ 


^e^>Z^^/ 


^rs 


¥S 


140 


BOOKKEEPING   FOR   MODERN  BUSINESS 


The  second  step  to  be  taken  in  closing  the  ledger  is  to  transfer  the  value  of  the  merchandise 
purchases,  85,922.50,  as  shown  in  the  Merchandise  Purchases  account  to  the  Merchandise 
Trailing  account  in  order  to  close  the  Merchandise  Purchases  account  and  transfer  the  net 
cost  of  purchases  to  the  Merchandise  Trading  account.  This  is  done  by  making  the  following 
journal  entry: 

niustration  117 


SI 


.yOci.■^i^i^if^/6ci^^i^^..^/^^<^<;^c^'^^ 


S^22 


J-O 


S<^22 


Jt? 


Post  the  journal  entry  to  the  proper  ledger  accounts  under  date  of  October  31st.  The 
result  of  this  journal  entry  closes  the  Merchandise  Purchases  account  and  debits  the  Mer- 
chandise Trading  account  as  shown  by  the  following  illustrations: 


Illustration  118 


/y^^^^y2'cJ^^:z^7^2^citU^i^y/ 


•'f 


J/ 


'2^etii^^^^i■c.^L^U/A    2 


SaJi 


SO 


-7^ 


jy 


/^2c^u^-fC/yia.j!,if^  y 


L^2J- 


J^ 


Illustration  IIQ 


//Z^4'€Ji-ci^PU:^od£y^^/-4 


=^^ 


a^ 


J/ 


/^^aid£/^yU./<zA^  y 


S(^. 


■22 


JO 


CL^ 


J/ 


'^ioi^>dzA^  Q 


^c/S'l 


^S 


The  third  step  to  be  taken  in  closing  the  ledger  is  to  record  the  value  of  the  unsold  mer- 
chandise on  hand,  $1,496.30,  as  shown  by  the  merchandise  inventory  to  the  Merchandise 
Trading  account  in  order  that  the  Merchandise  Trading  account  may  show  the  gross  trading 
profit  as  shown  by  the  profit  and  loss  statement  and  record  the  merchandise  inventory  in  the 
Merchandise  Inventory  account.     This  is  done  by  making  the  following  journal  entry 


BOOKKEEPING   WITH  BUSINESS  PAPERS 


141 


Illustration  120 


/y^<^ai.£^.,.yC^T»<3^t>f'i^ — 


♦^/ 


..^^«^-^^^*^-^ia>i^5C«^^'»»*^'i<.<C«-»i<zi<<i^^ 


/'^i?  i 


JO 


'V^^ 


Jff 


Post  the  journal  entry  to  the  proper  ledger  accounts  under  date  of  October  31st.  The 
result  of  this  journal  entry  records  the  value  of  the  unsold  merchandise  in  the  Merchandise 
Inventory  account  and  credits  the  Merchandise  Trading  account  in  order  to  show  the  gross 
trading  profit  in  the  Merchandise  Trading  account. 

Illustration  121 


J/ 


'£^ 


/Vt^C 


JO 


Illustration  122 


//2^<5-^^?^Ctf2<;^^isziki^<5<^^>^^;z^«2^^^ 


-7^ 


J/ 


/^eiike^f'^c^u^L^z^i^  J/ 


y^~ 

/ 

J^(f2  2 

J-(? 

a^ 

J/ 

3/ 

?^^.^^>AAf     / 


The  fourth  step  to  be  taken  in  closing  the  ledger  is  to  transfer  the  gross  trading  profit  on 
merchandise,  $556.15  (the  first  price  list),  as  shown  by  the  Merchandise  Trading  account,  to 
the  Profit  and  Loss  account  in  order  to  close  the  Merchandise  Trading  account  and  transfer 
the  gross  trading  profit  to  the  Profit  and  Loss  account.  The  Profit  and  Loss  account  is  the 
summary  account  to  which  all  profits  and  losses  are  transferred.  This  is  done  by  making  the 
following  journal  entry; 


142 

Illustration  123 


BOOKKEEPING   FOR   MODERN   BUSINESS 


7/ 


L<><^ 


--i^^£:'>^%e^/!t^<?^^;iJ^V2'»-z^;zi<J^^ 


'.^o^^^ 


J-^i 


2^ 


^Si 


2S 


Post  the  journal  entry  to  the  proper  ledger  accounts  under  date  of  October  31st.  The 
result  of  this  journal  entry  closes  the  Merchandise  Trading  account  and  transfers  the  gross 
trading  profit  to  the  Profit  and  Loss  account  as  shown  by  the  following  illustrations: 

Illustration  124 


-7^ — 


3/ 


J/ 


'^^<^£:^%.^^^       Q 


^O 


2^ 


<^^  7f 


ZL=l. 


J/ 


¥S 


Jj2- 


M^^^ 


Illustration  125 


/  yic>^>ic^^^?r:. 


^^?.d<iy 


T^= 


3/ 


/%a^k£y^.^/^Ui<:^c^*t^V- 


SS6 


2S 


The  fifth  step  to  be  taken  in  closing  the  ledger  is  to  transfer  the  total  cost  of  the  general 
expenses  of  the  business  as  shown  by  the  General  Expense  account  to  the  Profit  and  Loss 
account  in  order  to  dose  the  General  I'Apense  account  and  transfer  the  total  cost  of  conducting 
the  business  to  the  Profit  and  Loss  account.  This  is  done  by  making  the  following  journal 
entry : 


BOOKKEEPING   WITH  BUSINESS  PAPERS 


143 


Illustration  126 


7/ 


/3/ 


^s 


/J/ 


■^J- 


Post  the  journal  entry  to  the  proper  ledger  accounts  under  date  of  October  31st.  The 
result  of  this  journal  entry  closes  the  General  Expense  account  and  transfers  the  total  cost  of 
conducting  the  business  to  the  Profit  and  Loss  account  as  shown  by  the  following  illustrations: 


Illustration  127 

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The  sixth  step  to  be  taken  in  closing  the  ledger  is  to  transfer  the  net  profit,  $424.80  (the 
first  price  list),  as  shown  by  the  Profit  and  Loss  account,  to  Henry  Bruce's  Capital  account 
in  order  to  close  the  Profit  and  Loss  account  and  to  transfer  the  net  profit  of  the  business 
period  to  Henry  Bruce's  Capital  account.  This  is  done  by  making  the  following  journal  entry: 


144 

Illustration  129 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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Post  the  journal  entry  to  the  proper  ledger  accounts  under  date  of  October  31st,  The 
result  of  this  journal  entry  closes  the  Profit  and  Loss  account  and  credits  the  Proprietor's 
Capital  account  because  the  proprietor  is  entitled  to  any  profit  which  the  business  makes 
during  the  business  period.     This  is  shown  by  the  following  illustrations: 

Illustration  130 


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Balancing  the  Proprietor's  Account. — It  is  customary  to  balance  and  rule  the  Proprietor's 
Capital  account  at  the  end  of  a  business  period  in  order  to  show  the  proprietor's  net  capital 
at  the  beginning  of  the  next  business  period.     Mr.  Bruce  invested  S3, 500.00  in  the  business 


BOOKKEEPING   WITH  BUSINESS  PAPERS 


145 


on  October  1st.  During  the  month  or  business  period  the  business  gained  S424.80  (the 
first  price  list),  which  was  transferred  to  Henry  Bruce's  Capital  account  making  his  total 
net  capital  §3,924.80  on  November  1st.      . 

In  Henry  Bruce's  Capital  account,  enter  $3,924.80,  Net  Capital,  and  October  31st  in  red 
ink  on  the  debit  side;  rule  the  account,  and  then  transfer  the  red  ink  entry  to  the  credit  side 
of  the  account,  below  the  rulings,  in  black  ink,  under  date  of  November  1st  hke  the  follow- 
ing illustrations. 

Illustration  132 


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This  completes  the  closing  of  the  ledger. 

Before  proceeding  further  find  the  percentages  called  for  in  Exercise  37,  for  the  profit 
and  loss  statement  just  completed  for  October,  and  present  your  results  to  your  instructor 
for  approval. 

Questions:  1.  What  accounts  are  known  as  profit  and  loss  accounts?  2.  What  is  the 
object  of  making  a  profit  and  loss  statement?  3.  What  is  a  merchandise  inventory?  4.  What 
is  the  object  of  the  merchandise  inventory?  5.  How  is  the  cost  of  merchandise  sold  found? 
6.  What  is  meant  by  gross  profif?  How  is  it  found?  7.  What  is  meant  by  net  profit? 
How  is  it  found?  8.  Why  were  the  closing  journal  entries  made?  Answer:  First,  to  close 
the  accounts  which  were  used  in  finding  the  net  profit;  second,  to  transfer  the  net  profit  to 
the  Proprietor's  Capital  account;  third,  to  have  a  record  of  the  value  of  the  unsold  merchandise, 
calculated  usually  at  cost,  which  is  to  be  carried  over  into  the  next  business  period.  9.  Why 
was  the  Merchandise  Sales  account  debited  in  the  closing  journal  entry?  10.  W^hy  was  the 
Merchandise  Purchase  account  credited  in  the  closing  journal  entry?  The  General  Expense 
account?  11.  WlijMvas  the  Proprietor's  Capital  account  credited  for  the  net  profit?  12.  Turn 
to  the  profit  and  loss  statement  while  you  answer  the  following  questions: 

(a)  What  does  the  $4,426.20  represent? 

(b)  What  does  the  $1,496.30  represent? 

(c)  What  does  the  $4,982.45  represent? 

(d)  AVhat  does  the  $556.25  represent? 

(e)  What  does  the  $424.80  represent? 

(f )  What  does  the  $5,022.50  represent? 

13.  What  is  an  asset?  A  liabihty?  14.  What  is  the  object  of  the  :\Ierchandise  Trading 
account?  15.  What  is  the  object  of^the  Profit  and  Loss  account?  16.  AVhat  accounts  are 
classified  as  accounts  receivable?  Why?  17.  What  accounts  are  classified  as  accounts 
payable?     Why? 


146 

Illustration  133 


BOOKKEEPING  FOR   MODERN  BUSINESS 


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THE  BALANCE  SHEET 

The  oh^ed  of  preparing  the  balance  sheet  is  to  show  the  condition  of  the  business  as  of  a 
certain  date.  It  is  a  summary  of  all  financial  accounts,  showing  the  assets  owned  by  the 
business;  the  liabilities  owed  by  the  business;  and  the  net  capital  or  proprietary  interest. 
The  difference  between  the  total  assets  and  the  total  liabilities  shows  the  net  capital  or  pro- 
prietary interest  of  the  business. 

The  accounts  used  are  the  asset  and  liability  accounts,  namely,  the  Cash  account,  the 
personal  accounts,  the  Notes  Receivable  account,  the  Merchandise  Inventory  account,  and  the 
Notes  Payable  account.  The  assets  are  listed  in  the  balance  sheet  in  the  order  of  their  con- 
vei-sion  into  cash  while  the  liabilities  are  listed  in  the  order  in  which  provision  would  need 
be  made  for  their  payment. 

The  balance  sheet  is  prepared  at  the  end  of  a  business  period,  namely,  montlily,  quarterly, 
semi-yearly,  or  yearly.  The  heading  of  the  balance  sheet  should  show  the  date  on  which  it 
was  prepared  as  shown  in  Illustration  133. 

Instructions  for  Preparing  the  Balance  Sheet. — Take  a  sheet  of  journal  paper  and  on  the 
blue  line  above  tiic  double  red  lines  write  Balance  Shed  of  Henry  Bruce,  October  31,  19 — . 

On  the  first  line  beneath  the  d(nil)le  red  lines  on  left-hand  i)age  write  Assets  and  then 
collect  the  assets  from  your  trial  balance  iiiid  inventory  sheet  in  the  order  of  their  conversion 


THE  BALANCE  SHEET 


147 


Illustration  133 


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into  cash  as  shown  in  the  model  balance  sheet.  Since  you  have  indicated  on  your  trial  balance 
which  are  assets  and  which  are  liabilities  simply  list  them  as  directed  above.  The  first  item  to 
be  entered  under  Assets  is  Cash;  the  second,  Merchandise  Inventory;  third,  Notes  Receivable; 
fourth,  Accounts  Receivable;  followed  by  the  personal  accounts  listed  separately  which  make 
up  the  total  accounts  receivable. 

Observe  that  the  item  of  merchandise  inventory  does  not  appear  in  the  trial  balance  but 
on  the  inventory  sheet  which  was  prepared  at  the  end  of  the  business  period  and  afterward 
entered  in  the  ledger  when  closing  the  profit  and  loss  accounts. 

The  total  assets  are  found  by  adding  the  items  in  the  first  money  column.  Extend  the 
amount  thus  found  into  the  second  money  column. 

Proceed  to  list  the  liabilities  found  in  the  trial  balance  as  follows: 

First,  write  Liabilities  on  the  first  line  beneath  the  double  red  lines  on  the  right-hand  page. 
Enter  the  liabilities  in  the  balance  sheet  in  the  order  in  which  provision  would  be  made  for 
their  payment. 

The  first  item  to  be  entered  under  Liabilities  is  Notes  Payable;  the  second,  Accounts 
Payable;  followed  by  the  Personal  accounts  which  make  up  the  total  accounts  payable.  The 
next  item  to  be  entered  is  Total  Liabilities,  which  is  found  by  adding  the  items  in  the  first 
money  column.     Extend  the  amount  thus  found  into  the  second  money  column. 


148 


BOOKKEEPING   FOR   MODERN   BUSINESS 


The  proprietary  interest  should  next  be  shown  in  the  balance  sheet.  The  first  item  to  be 
entered  under  Proprietary  interest  is  Henry  Bruce's  investment;  second,  Henry  Bruce's 
net  profit  for  the  niontii  ending  10  81  19 — ;  tiiird,  Heiny  Bruce's  net  capital,  extending 
the  amount  into  the  second  money  column.  Rule  and  foot  the  two  sides  of  the  balance  sheet 
as  shown  in  the  model  balance  sheet  of  Illustration  133. 

Comment:  The  clerical  accuracy  is  proved  if  the  total  assets  as  shown  by  the  balance 
sheet  equal  tiie  total  liabilities  plus  the  net  capital  or  proprietorship. 

The  Proof  Trial  Balance 

A  proof  trial  balance  should  always  l^e  taken  from  the  ledger  after  the  various  profit  and 
loss,  and  financial  accounts  have  been  ruled  at  the  close  of  a  business  period.  It  is  essential 
that  the  ledger  is  in  balance  after  closing  the  books  and  before  any  additional  entries  are 
made  in  it. 

Instructions:  Take  a  sheet  of  journal  paper,  and  on  the  blue  line  above  the  double  red 
lines,  write  the  heading  Proof  Trial  Balance,  October  31,  19 — .  Follow  the  same  instruc- 
tions in  preparing  the  proof  trial  balance  as  you. followed  in  preparing  the  trial  balance. 


A  Proof  Trial  Balance 


Illustration  134 


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THE   WORKING  SHEET  149 

The  Working  Sheet 

As  an  aid  in  the  preparation  of  the  balance  sheet  and  the  profit  and  loss  statement  which 
you  have  just  prepared,  a  so-called  working  sheet  may  be  employed.  It  should  not  be  used 
as  a  finished  statement  to  be  presented  to  the  proprietor  but  it  should  be  used  for  its  infor- 
mational value  in  distinguishing  between  financial  and  profit  and  loss  accounts. 

The  working  sheet  is  a  condensed  statement  designed  to  show  at  a  glance  both  the 
result  and  condition  of  the  business.  It  is  a  valuable  aid  in  the  construction  of  the  balance 
sheet  and  the  profit  and  loss  statement  because  it  illustrates  the  relationship  between  the 
trial  balance  and  these  statements,  since  all  the  amounts  appearing  in  the  trial  balance  are 
distributed  in  one  or  more  of  the  columns. 

Explanation  of  the  Working  Sheet. — The  first  two  columns  of  the  working  sheet  are  a 
reproduction  of  the  trial  balance.  The  figures  of  the  first  two  columns  are  extended  into  the 
remaining  four  columns.  The  third  and  fourth  columns  are  used  to  record  the  amounts  neces- 
sary to  determine  the  net  profit  or  net  loss  of  the  business  period.  The  fifth  column  contains 
the  assets,  and  the  sixth  column  contains  the  liabilities  and  proprietary  interest  of  the  business. 

In  addition  to  the  facts  given  in  the  trial  balance,  it  is  necessary  to  consider  certain  figures 
obtained  outside  the  books.  The  merchandise  inventory,  representing  an  item  not  given  in 
the  trial  balance,  affects  both  the  balance  sheet  and  the  profit  and  loss  statement.  It  is, 
therefore,  entered  in  both  of  these  statements  in  order  not  to  disturb  the  equilibrium,  shown 
by  the  trial  balance. 

The  working  sheet  affords  a  convenient  means  of  analyzing  items  of  the  trial  balance 
similar  to  the  method  used  in  analyzing  the  October  trial  balance  when  it  was  shown  that 
every  account  having  a  debit  balance  is  either  an  asset,  a  loss,  or  an  amount  necessary  to 
determine  the  profit  or  loss  on  merchandise,  and  every  account  having  a  credit  balance  is 
either  a  liability,  a  profit,  or  an  amount  necessary  to  determine  the  profit  or  loss  on  merchandise. 

The  results  in  the  working  sheet  may  be  tested  by  means  of  a  valuable  check.  The  differ- 
ence between  the  totals  of  the  profit  and  loss  columns  is  necessarily  the  net  profit  or  net  loss 
for  the  business  period.  The  net  profit  is  added  to  or  the  net  loss  is  subtracted  from  the 
proprietor's  net  capital  at  the  close  of  the  previous  business  period  beneath  the  footing  of 
the  second  or  credit  column  of  the  working  sheet.  This  represents  the  Proprietor's  net 
capital  at  the  beginning  of  the  new  business  period,  and  when  added  to  the  habilities  makes 
that  column  equal  the  asset  column.     This  maj^  be  expressed  as  follows: 

The  Proprietor's  capital  at  the  close  of  a  business  period  plus  the  net  profit  (or  minus  the 
net  loss)  equals  the  net  capital  or  proprietorship  at  the  beginning  of  the  new  business  period. 
In  several  earlier  instances,  we  showed  that: 

Assets  —  Liabilities  =  Net  Capital  or  Proprietorship ;  or. 

Assets  =  Liabihties+ Net  Capital  or  Proprietorship. 

The  following  illustrates  the  form  of  a  working  sheet  prepared  from  the  trial  balance  and 
merchandise  inventory  sheet  taken  at  the  end  of  the  October  work.  Compare  the  result  and 
condition  of  the  business  as  shown  by  the  working  sheet  with  the  result  and  condition  of  the 
business  as  shown  by  the  balance  sheet  and  profit  and  loss  statement  which  you  prepared 
for  Mr.  Bruce. 


150 

Ulustration  135 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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TEST  LEDGERS  151 

Test  Ledger  No.  1 

This  test  ledger  is  similar  in  every  respect  to  the  regular  ledger  of  October,  except  that 
the  names  of  the  accounts  and  the  amounts  arc  different.  Proceed  with  the  test  ledger  No.  1, 
as  follows : 

1.  Rule  off  all  personal  accounts  that  balance. 

2.  Prepare  a  trial  balance. 

3.  Prepare  a  working  sheet;  inventory  of  merchandise  is  $2,456.84. 

4.  Prepare  a  profit  and  loss  statement  which  shows  the  net  profit  or  net  loss. 

5.  Prepare  a  balance  sheet  which  shows  the  net  capital  or  proprietary  interest. 

6.  Close  the  ledger  according  to  instructions  given  below. 

7.  Prepare  a  proof  trial  balance. 

8.  Find  the  percentages  called  for  in  Exercise  37. 

9.  Present  all  your  work  to  your  instructor  for  examination  and  approval. 

Directions  for  Closing  Test  Ledger  No.  1.— First  Step.— Prepare  a  journal  entry  to  trans- 
fer the  balance  of  the  Merchandise  Sales  account  representing  the  net  returns  from  sales  to  the 
Merchandise  Trading  account.     Post  the  journal  entry  and  rule  the  Merchandise  Sales  account. 

Second  Step.— Prepare  a  journal  entry  to  transfer  the  balance  of  the  Merchandise  Pur- 
chases account  representing  the  cost  of  merchandise  purchased  to  the  IMerchandise  Trading 
account.     Post  the  journal  entry  and  rule  the  Merchandise  Purchases  account. 

Third  Step.— Prepare  a  journal  entry  to  record  the  merchandise  inventory  and  to  enter 
the  value  of  the  unsold  merchandise  in  the  Merchandise  Trading  account.  Post  the  journal 
entr3\ 

Fourth  Step.— Frepare  a  journal  entry  to  transfer  the  balance  of  the  Merchandise  Trading 
account  representing  the  gross  trading  profit  to  the  Profit  and  Loss  account.  Post  the  journal 
entry  and  rule  the  Merchandise  Trading  account. 

Fifth  Step.— Frepare  a  journal  entry  to  transfer  the  balance  of  the  General  Expense 
account  representing  the  cost  of  operating  the  business  to  the  Profit  and  Loss  account.  Post 
the  journal  entry  and  rule  the  General  Expense  account. 

Sixth  Step.— 'Prepare  a  journal  entry  to  transfer  the  balance  of  the  Profit  and  Loss  account 
representing  the  net  profit  for  the  business  period  to  the  Proprietor's  Capital  account.  Post 
the  journal  entry  and  rule  the  Profit  and  Loss  account. 

Seventh  Step.— Close  Harry  Mann's  Capital  account  by  writing,  in  red  ink,  October  31st 
and  Net  Capital,  on  the  debit  side  with  the  amount  necessary  to  balance  the  account.  Rule 
and  foot  the  account.  Transfer  the  net  capital,  in  black  ink,  to  the  credit  side  of  Harry 
Mann's  Capital  account,  under  date  of  November  1st.  Make  sure  that  all  dates  and  page 
numbers  are  properly  entered. 

Test  Ledger  No.  2 

Test  ledger  No.  2  is  similar  in  every  respect  to  test  ledger  No.  1,  except  in  the  number  of 
the  accounts.     The  amount  of  the  merchandise  inventory  is  $4,365.78. 

Rule  off  all  personal  accounts  that  balance,  take  a  trial  balance,  prepare  a  working  sheet, 
make  a   profit  and  loss  statement  and  a  balance  sheet,  find  the  percentages  called  for  in 


152 


BOOKKEEPING  FOR  MODERN  BUSINESS 


Exercise  37,  prepare  the  necessaiy  journal  entries  and  close  the  ledger,  take  a  proof  trial 
balance,  and  present  all  your  work  to  your  instructor  for  examination  and  approval. 

Review  Exercises  in  Statements 

These  examples  are  similar  in  every  icspect  to  the  trial  l)alance  of  October  31st,  except 
that  the  names  of  the  accounts  and  the  amounts  are  different.  Prepare  the  statements  called 
for  in  the  following  exercises. 

Directions:  Use  sheets  of  journal  paper. 

1.  Copy  the  trial  balance  at  the  head  of  the  journal  paper. 

2.  Prepare  a  working  sheet  by  following  the  instructions  given  on  page  149.  On  a  sheet  of 
blank  paper  rule  the  form  of  a  working  sheet  similarly  to  the  model  form  in  Illustration  134. 

3.  Prepare  a  profit  and  loss  statement  which  shows  the  net  profit  or  the  net  loss. 

4.  Prepare  a  balance  sheet  which  shows  the  net  capital  or  proprietary  interest. 

5.  Date  each  statement  as  of  January  1,  19 — . 

6.  Find  the  percentages  called  for  in  Exercise  37. 

7.  Present  all  your  work  to  your  instructor  for  examination  and  approval. 


Exercise  80 

Exercise  81 

Cash 

$3,454.40 

Cash 

$4,877.50 

Notes  Receivable. . .  . 

724.36 

Notes  Receivable 

684.95 

Notes  Payable 

$637.25 

Notes  Payable 

$852.40 

A.  C.  ]\Iartin,  Capital 

4,000.00 

J.  K.  Morris-,  Capital 

5,000.00 

Mdse.  Purchases.  .  .  . 

4,275.74 

Mdse.  Purchases ... 

4,745.90 

Mdse.  Sales 

4,167.76 

Mdse.  Sales 

4,689.45 

General  Expense .... 

103 . 55 

General  Expense.  .  .  . 

110.67 

L.  J.  Williams 

246.11 

John  J.  Johnson 

356.87 

C.  L.  Seasholes  .... 

75.68 

A.  A.  Anderson 

245.69 

A.  C.  Jordan 

198 . 28 

Walter  Wilson  &  Co. 

367.87 

J.  R.  Murphy 

218.42 

Benson  &  Co 

76.50 

Howard  James  &  Co. 

546.98 

J.  M.  Gottschalk.  .  . 

176.49 

T.  C.  Clifford 

489.13 

A.  J.  Heinly 

267 . 12 

Walter  Mann 

208.42 

Charles  Kunz 

316.02 

Henry  Brown  &  Co .  . 

438.90 

R.  J.  Ivrewson 

75.09 

Walter  Benson 

87.43 

R.  J.  jMason 

525.00 

C.  B.  McCann 

65.40 

West,  Stone  &  Co.  .  . 

328.70 

P.  C.  Belfield 

172.14 

W.  C.  Schmidt  .... 

123.36 

C.  J.  Garwood   .... 

213.22 

G.  A.  Phillips 

432.17 

El  wood  Geiges 

342 . 13 

J.  W.  Lee 

Price  B.  Engle 

28.42 
321 . 17 

$10,332.65    $10,332.65 

$12,300.67  $12,300.67 

Inventory: 

Inventory: 

Merchandise 

$458.95 

Merchandise 

$675.87 

A   GENERAL  REVIEW 


153 


Exercise  82 


Cash 

Notes  Receivable. . . 

Notes  Payable 

A.  C.  WiUis,  Capital 
Mdse.  Purchases.  .  . 

Mdse.  Sales 

General  Expense .  .  . 

George  A.  Ennis 

Robert  Bowden.  .  .  . 

T.  K.  Reed 

John  Wanamaker.  . 
George  Bunn 


f  3, 020. 79 
1,723.56 


5,256.78 

134.56 

32.56 

580.25 


11,125.34 
4,500.00 

3,645.78 


362.35 
789.25 
325.78 


$10,748.50  $10,748. 50 


Inventory : 
Merchandise. 


5,135. 


Exercise  83 

Cash... $4,435.37 

Notes  Receivable.  ..      1,367.24 

Notes  Payable 

Walter  Roberts 

]\Ids(\  Purchases.  . 

Mdse.  Sales 

General  Expense.  . 
E.  M.  Lippincott. . 

M.  L.  Lee 

Y.  0.  Peters 

George  L.  Taylor.  . 


6,690.23 

234 . 78 
456.24 
360.02 


^2,347 .  56 
6,500 .  00 

4,246.08 


426.79 
23.45 


$13,543.88  $13,543.88 


Inventory: 
Merchandise. 


!,476.58 


Supplementary  Exercise  84 

The  books  used  in  this  set  are  the  journal,  the  cashbook,  the  purchases  journal,  the  sales 
journal,  the  notes  receivable  book,  the  notes  payable  book,  and  the  ledger.  Open  the  following 
accounts  in  the  ledger,  three  accounts  on  each  page,  in  the  order  given.  You  will  be  instructed, 
from  time  to  time,  when  to  post  to  these  ledger  accounts. 


John  B.  Williams,  1618  Chestnut  St.,  City. 

A.  D.  Jones  &  Bro.,  1726  North  23d  St.,  City. 

Thomas  Clinton  Sons,  116  Chester  Ave.,  City. 

William  Gray,  124  Euclid  Ave.,  City. 

W.  D.  Rodgers,  2147  Frankford  Ave.,  City. 

Aaron  Parker,  918  State  St.,  City. 

C.  B.  Miller  &  Co  ,  672  Front  St.,  City. 

A.  M.  Benton  &  Son,  1214  Green  St.,  City. 

Charles  Sherman,  5062  Wayne  Ave.,  City. 

Walter  B.  Allen,  1718  Race  St.,  City. 

J.  B.  Overman  Co.,  581  North  Broad  St.,  City. 
B.  S.  Martin  began  the  retail  fuel  and  feed  business  at  1017  Market  St.,  City, 

investing  cash,  $4,200.00. 
Paid  rent  of  store  in  cash,  $70.00. 
Bought  of  C.  B.  Miller  &  Co.,  672  Front  St.,  City,  on  account,  merchandise, 

$742.00. 
Paid  Hoskins  &  Co.,  cash  for  books  and  stationery,  $23.45. 
Bought  of  A.  M.  Benton  &  Son,  1214  Green  St.,  City,  on  account  at  10  days, 
merchandise,  $678.23. 


Cash. 

Notes  Receivable. 

Merchandise  Inventory. 

Notes  Pa^'able. 

B.  S.  Martin,  Capital. 

Merchandise  Purchases, 

Merchandise  Sales. 

General  Expense. 

Merchandise  Trading. 

Profit  and  Loss. 


July  1. 


154  BOOKKEEPING  FOR  MODERN  BUSINESS 

July  3.     Sold  to  John  B.  Williams,  1618  Chestnut  St.,  City,  on  account,  merchandise, 
8234.56. 
Paid  C.  B.  Miller  &  Co.,  cash,  S200.00,  on  account. 

4.  Bought  of  Charles  Sherman,  5062  Wayne  Ave.,  City,  on  our  note  at  10  days, 

merchandise,  S411.26. 
Sold  to  A.  D.  Jones  &:  Bro.,  1726  N.  23d  St.,  City,  on  their  15-day  note,  mer- 
chandise, -5311.45. 

5.  Sold  to  Thomas  Clinton  Sons,  116  Chester  Ave.,  City,  on  account,  merchandise, 

8234.78. 

6.  Received  of  John  B.  Williams  cash,  $100.00,  to  apply  on  bill  of  7,  3. 

Sold  to  William  Gray,  124  Euclid  Ave.,  City,  on  account  at  20  days,  merchandise, 
$345.22. 

8.  Received  of  John  B.  Williams  his  20-day  note  for  $134.56  in  full  for  l)ill  sold  him 

on  7/3. 

9.  Bought  of  Walter  B.  Allen,  1718  Race  St.,  City,  on  account  at  20  days,  mer- 

chandise, $1,145.43. 
Sold  to  W.  D.  Rodgers,  2147  Frankford  Ave.,  City,  on  his  note  at  15  days, 
merchandise,  $768.89. 

10.  Bought  of  J.  B.  Overman  Co.,  581  N.  Broad  St.,  City,  on  our  note  at  20  days, 

merchandise,  $538.07. 

Post  the  transactions  from  your  purchases  journal,sales  journal, cashbook, 
notes  receivable  book,  notes  payable  book.  Rule  out  all  balancing  items  as 
the  balancing  items  are  posted. 

11.  Bought  of  Charles  Sherman,  on  account,  merchandise,  $1,250.00. 

Bought  of  J.  B.  Overman  Co.,  terms  cash  with  purchase,  merchandise,  $775.00. 

12.  Paid  A.  M.  Benton  &  Son  cash,  $678.23,  for  invoice  of  7,  2. 

13.  Received  of  Thomas  Clinton  cash,  $100.00,  to  apply  on  account. 

Gave  Charles  Sherman  a  10-day  note  for  $500.00  in  part  payment  of  invoice  of 
7/9. 

15.  Sold  to  Aaron  Parker,  918  State  St.,  City,  terms  cash  with  order,  merchandise, 

$456.00. 
Paid  Charles  Sherman  cash,  $411.26,  for  our  note  of  7/4. 

16.  Sold  to  W.  D.  Rodgers,  on  his  note  at  10  days,  merchandise,  $213.00. 

17.  Sold  John  B.  Williams,  on  account,  merchandise,  $415.30. 

18.  Gave  C.  B.  Miller  &  Co.  our  10-day  note  for  $200.00,  to  apply  on  invoice  of  7/] 
Sold  A.  D.  Jones  &  Bro.,  on  account,  merchandise,  $756.44. 

19.  Received  of  A.  D.  Jones  &  Bro.  cash,  $311.45,  in  payment  of  their  note  of  7/4. 
Received  of  John  B.  Williams  cash,  $200.00,  to  apply  on  bill  of  7/l7. 

20.  Sold  to  Aaron  Parker,  terms  cash  with  order,  merchandise,  $234.34. 
Bought  of  Walter  B.  Allen,  on  account,  merchandise,  $1,345.00. 

Post  the  transactions  from  your  purchases  journal,  sales  journal,  cash- 
book,  notes  receivable  book,  notes  payable  book  to  the  projier  ledger  accounts. 


A   GENERAL  REVIEW  155 

July  22.     Sold  to  William  Gray,  on  his  note  at  30  days,  merchandise,  S758.90. 

Paid  Charles  Sherman  cash,  $500.00,  in  part  payment  on  invoice  of  7/11. 

23.  Paid  Charles  Sherman  cash,  $500.00,  in  payment  of  our  note  of  7/13. 

24.  Received  of  W.  D.  Rodgers  cash,  $768.89,  in  payment  cf  his  note  due  to-day. 
Bought  of  A.  M.  Benton  &  Son,  merchandise,  $134.00. 

25.  Received  of  A.  D.  Jones  &  Bro.  cash,  $200.00.  to  apply  on  invoice  7/l8. 
Paid  Walter  B.  Allen  cash,  $300.00,  to  apply  on  invoice  of  7/20. 

26.  Received  of  W.  D.  Rodgers  cash,  $213.00,  in  payment  of  his  note  dated  7/16. 
Received  of  William  Gray  cash,  $345.22,  in  full  paj-ment  of  bill  of  7/6. 

27.  Sold  Aaron  Parker,  on  account,  merchandise,  $819.27. 

Gave  Walter  B.  Allen  our  note  at  1  month  for  $500.00,  to  apply  on  invoice  7/20. 
29.     Received  of  John  B.  Williams  cash,  $134.56,  in  payment  of  his  note  due  yester- 
day. 

Paid  C.  B.  Miller  &  Co.  cash,  $538.07,  in  payment  of  our  note  due  yesterday. 

Paid  Walter  B.  Allen  cash,  $1,145.43,  for  invoice  of  7/9. 
80.     Received  of  Aaron  Parker  cash,  $200.00,  on  bill  7/27. 

Paid  J.  B.  Overman  Co.  cash,  $538.07,  for  his  note  due  to-day. 
31.     Paid  student  cash,  $65.00,  salary  for  the  month. 

Merchandise  inventory  taken  this  day,  $1,814.29. 

Post  the  remaining  transactions,  close  and  check  the  cashbook,  sales  journal,  the  pur- 
chases journal,  the  notes  receivable  book  and  the  notes  paj^able  book. 

Prepare  a  trial  balance  from  your  ledger,  and  prepare  a  working  sheet,  a  profit  and  loss 
statement  and  a  balance  sheet.  Find  the  percentages  called  for  in  Exercise  37.  Prepare  the 
journal  entries  and  close  the  ledger  accounts. 

The  work  of  the  entire  exercise  should  now  be  submitted  to  your  instructor  for  examination 
and  approval. 

Supplementary  Exercise  85 

The  books  used  in  this  set  are  the  journal,  the  cashbook, the  purchases  journal,  the  sales 
journal,  the  notes  receivable  book,  the  notes  paj^able  book,  and  the  ledger.  Open  the  following 
accounts  in  the  ledger,  three  accounts  on  each  page,  in  the  order  given.  You  will  be  instructed, 
from  time  to  time,  when  to  post  to  these  ledger  accounts. 

Cash. 

Notes  Receivable.  Howard  Mason,  543  East  Front  St.,  City. 

Merchandise  Inventory.  A.  J.  Wilhams,  63  North  Elm  St.,  City. 

Notes  Payable.  T.  J.  Clayton,  423  Cherry  St.,  City. 

Student,  Capital.  •  H.  H.  Howe,  217  Chester  Ave.,  City. 

Merchandise  Purchases. 

Merchandise  Sales.  T.  C.  Martin  &  Co.,  434  Green  St.,  City. 

General  Expense.  L.  H.  Moore,  234  Water  St.,  City. 

Merchandise  Trading.  J.  L.  Adams,  3467  Chestnut  St.,  City. 

Profit  and  Loss. 


156  BOOKKEEPING  FOR  MODERN  BUSINESS 

January  1.     Student  licpjan  the  tea,  cofifeo  and   spice  business  at  314  Walnut  St.,  City, 
investing  cash,  So,000.00. 
Paid  tlie  rent  for  January  in  cash,  S60.00. 

2.  Bought  of  T.  C.  Martin  &  Co.,  434  Green  St.,  City,  on  account  at  10  days, 

merchandise,  S36.5.80. 
Bought  of  L.  H.  Moore,  234  Water  St.,  City,  on  account,  merchandise, 
8204.50. 

3.  Sold  to  Howard  Mason,  543  East  Front  St.,   City,  on  his  note  at  10  days, 

200  lb.  Japan  Tea  at  52^^  pov  lb.,  300  lb.  Alocha  Coffee  at  32^^  per  \h. 

4.  Sold  to  A.  J.  AVilliams,  63  North  VAm  St.,  City,  on  account,  240  lb.  English 

Breakfast  Tea  at  636  per  lb.,  210  11).  Young  Hyson  Tea  at  49^  per  lb. 

5.  Bought  of  J.  L.  Adams,  3467  Chestnut  St.,  City,  on  your  note  at  10  days, 

merchandise,  i5276.89. 

6.  Paid  for  books  and  stationer}^,  $13.75. 

8.  Received  of  A.  J.  Williams  on  account,  his  10-day  note  for  $200.00. 
Received  of  A.  J.  Williams  cash  for  balance  of  bill  of  the  4th,  854.10. 

9.  Sold  to  T.  J.  Clayton,  423  Cherry  St.,  City,  on  account,  150  lb.  Rio  Coffee  at 

223^f<  per  lb.,  150  lb.  Java  Coffee  at  34^  per  lb. 

11.  Sold  to  H.  H.  Howe,  217  Chester  Ave.,  City,  on  his  15-day  note,  300  lb. 

Mocha  Coffee  at  363/^^^  per  lb.,  150  \h.  Cejdon  Tea  at  75d  per  lb. 

12.  Gave  T.  C.  INIartin  your  30-day  note  for  invoice  of  merchandise  bought  on 

the  2d,  8365.80. 

Post  the  transactions  from  your  purchases  journal,  sales  journal, 
cashbook,  notes  receivable  book,  notes  payable  book.  Rule  out  all 
Ijalancing  items  as  the  balancing  items  are  posted. 

13.  Received  of  Howard  Mason  cash,  $201.50,  in  payment  of  his  note  due  to-day. 
15.     Paid  J.  L.  Adams  cash,  $376.89,  for  your  note  due  to-day. 

17.  Bought  from  J.  L.  Adams,  on  account  at  10  days,  merchandise,  $354.50. 

18.  Paid  an  electric  light  ])ill,  $4.35. 

Received  of  A.  J.  Williams  cash,  $200.00,  in  payment  of  liis  note  due  to-day. 

20.  Sold  to  Howard  Mason,  on  account  at  10  days,  150  lb.  Java  Coffee  at  34}^d 

per  lb.,  225  lb.  :\Iocha  Coffee  at  32^  per  lb. 

21.  Received  from  T.  J.  Clayton  cash,  $50.00,  to  apply  on  bill  sold  him  on  the 

9th. 

22.  Paid  L.  H.  Moore  cash,  $150.00,  on  account. 

23.  Bought  of  T.  C.  Martin,  on  account  at  10  days,  merchandise,  $154.78. 

24.  Sold  to  H.  H.  Howe,  on  account  at  10  days,  120  lb.  Japan  Tea  at  47^  per  lb., 

140  lb.  Young  Hyson  Tea  at  52(^  p(>r  lb. 

Post  the  transactions   from   your  purchases  journal,  sales  journal, 
cashbook,  notes  receivable  book,  notes  payable  book  to  the  proper  ledger 
accounts. 
26.     Received  of  H.  H.  Howe  cash,  $222.00,  in  payment  of  his  note  due  to-day. 


OCTOBER   PRICE  LISTS 


157 


January  27.     Sold  to  A.  J.  Williams,  on  his  10-day  note,  210  lb.  Java  at  33^  per  lb.,  250  lb. 
iMaracaibo  Coffee  at  27^  per  lb. 
28.     Gave  T.  C.  Martin  your  30-day  note  for  $100.00,  to  apply  on  account. 
30.     Sold  to  J.  L.  Adams,  on  his  30-day  note,  280  lb.  Young  Hyson  Tea  at  42j!f 
por  lb.,  210  lb.  Java  Coffee  at  34:146  per  lb. 
]Merchandise  inventory  taken  this  day,  $450.00. 
Post  the  remaining  transactions  and  close  and  check  the  books  of  original  entry. 
Prepare  a  trial  balance,  a  working  sheet,  a  profit  and  loss  statement,  and  a  balance  sheet. 
Find  the  percentages  called  for  in  Exercise  37.     Prepare  the  journal  entries  and  close  the 
ledger  accounts. 

The  work  of  the  entire  exercise  should  now  be  submitted  to  your  instructor  for  examination 
and  approval. 

October  Price  Lists 


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

Barley 

$1.20 

$1.21 

$1.22 

$1.19 

$1.17 

$1.16 

$1.14 

$1.23 

.$1.11 

$1.24 

$1.10 

$1.09 

$1.12 

Clover  Seed 

15.40 

15.39 

15.41 

15.38 

15.42 

15.37 

15.43 

15.40 

15.60 

15.59 

15.41 

15.25 

15.29 

Corn 

1.62 

1.60 

1.59 

1.63 

1.61 

1.58 

1.64 

1.57 

1.60 

1.56 

1.65 

'1.55 

1.67 

Flour 

12.05 

12.10 

12.17 

12.06 

12.11 

12.30 

12.25 

12.19 

12.17 

12.31 

12.28 

12.09 

12.13 

Oats 

.77 

.76 

.78 

.79 

.71 

.70 

.74 

.80 

.69 

.68 

.77 

.79 

.76 

Rye 

1.34 

1.33 

1.32 

1.35 

1.37 

1.38 

1.40 

1.31 

1.43 

1.30 

1.44 

1.45 

1.42 

Timothy  Seed 

8.05 

8.10 

8.00 

8.05 

8.14 

9.00 

7. .50 

7.75 

7.90 

8.90 

8.75 

8.50 

7.00 

Wlieat 

1.7S 

l.SO 

1.81 

1.77 

1.79 

1.82 

1.76 

1.83 

1.74 

1.84 

1.75 

1.85 

1.73 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

Barle}- 

$1.13 

$1.25 

.$1.26 

$1.07 

$1.06 

$1.27 

$1.08 

$1.28 

$1.01 

.$1.03 

$1.29 

$1.04 

fl.20 

Clover  Seed 

15.15 

15.60 

15.20 

15.55 

15.16 

15.10 

15.17 

15.67 

15.87 

15.50 

15.43 

15.73 

15.10 

Corn 

1.54 

1.68 

1.69 

1.70 

1.53 

1.52 

1.60 

1.61 

1.63 

1.58 

1.56 

1.69 

1.62 

Flour 

12.22 

12.16 

12.15 

12.50 

12.49 

12.40 

12.39 

12.14 

12.48 

12.41 

12.17 

12.45 

12.37 

Oats 

.72 

.71 

.68 

.67 

.77 

.76 

.72 

.81 

.78 

.79 

.71 

.72 

.77 

Rye 

1.41 

1.29 

1.28 

1.47 

1.4S 

1.27 

1.46 

1.26 

1.53 

1.51 

1.25 

1.50 

1.34 

Timothy  Seed 

7.25 

7.30 

7.40 

7.77 

7.78 

7.19 

7.29 

7.13 

8.06 

7.90 

8.10 

8.15 

8.09 

Wheat 

1.86 

1.72 

1.71 

1.70 

1.87 

1.88 

1.80 

1.79 

1.77 

1.82 

1.84 

1.71 

1.79 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

37 

38 

39 

Barley 

$1.22 

$1.24 

.$1.18 

$1.16 

$1.14 

$1.26 

$1.21 

.$1.19 

$1.23 

$1.17 

$1.25 

$1.15 

$1.13 

Clover  Seed 

15.19 

15.75 

15.64 

15.72 

15.09 

15.11 

15.17 

15.. 36 

15.63 

15.71 

15.21 

15.00 

15.56 

Corn 

1.67 

1.55 

1.65 

1.56 

1.66 

1.57 

1.64 

1.58 

1.61 

1.63 

1.59 

1.60 

1.53 

Flour 

12.47 

12.27 

12.17 

12.16 

12.26 

12.46 

12.56 

12.19 

12.29 

12.30 

12.43 

12.33 

12.50 

Oats 

.75 

.73 

.79 

.80 

.69 

.65 

.78 

.73 

.72 

.69 

.79 

.70 

.72 

Rye 

1.32 

1.30 

1.36 

1.38 

1.40 

1.28 

1.33 

1.35 

1.31 

1.37 

1.29 

1.39 

1.41 

Timothy  Seed 

8.11 

8.75 

8.57 

8.37 

8.27 

8.01 

8.56 

7.96 

7.99 

8.32 

8.21 

8.11 

8.17 

Wheat 

1.73 

1.85 

1.75 

1.84 

1.74 

1.83 

1.76 

1.82 

1.79 

1.77 

l.Sl 

1.80 

1.87 

BANKING 

PART   V 


INTRODUCTION   TO    BANKING   PRACTICE 

Bask. — A  bank  is  an  institution  chartered  by  either  the  national  or  the  state  government 
to  deal  in  credits  and  money.  Banks  are  divided  into  two  classes;  namely,  Savings  and 
Commercial  Banks. 

Savings  Bank. — A  savings  bank  is  one  chartered  by  the  state  for  the  purpose  of  encour- 
aging the  person  of  moderate  means  to  save  a  portion  of  his  income.  Deposits  in  savings 
banks  draw  interest  which  is  credited  to  the  depositor's  account  usually  semi-annually. 
These  deposits  usuall}'  are  not  subject  to  check.  The  money  deposited  in  a  savings  bank 
may  be  withdrawn  only  when  a  written  order  is  given  and  the  depositor's  pass  book  is  pre- 
sented at  the  bank. 

Commercial  Bank. — A  commercial  bank  is  one  that  transacts  a  general  banking  business 
and  renders  important  services  to  business  men.  National  Banks,  Trust  Companies,  State 
banks,  and  some  private  banks  belong  to  this  class.  Some  of  the  functions  of  the  commercial 
bank  are: 

1.  It  accepts  money  on  deposit  subject  to  check. 

2.  It  lends  money  on  approved  security. 

3.  It  facilitates  the  sending  of  money  from  one  place  to  another  b\^  allowing  the  deposits 

to  be  drawn  out  on  an  order  called  a  check. 

4.  It  provides  a  safe  place  to  keep  valuables  and  securities. 

5.  It  makes  collections,  such  as  notes,  checks,  drafts,  and  trade  acceptances. 

6.  It  advises  its  patrons  concerning  the  advisability  of  making  investments.     Commercial 

banks  probably  have  a  wider  knowledge  along  this  line  than  any  other  financial 
institution. 

How  to  Open  a  Bank  Account. — After  a  person  has  decided  to  open  an  account  with  a 
commercial  bank,  the  bank  usually  requires  that  he  be  introduced  to  some  oflScer  or  employee 
before  he  will  be  accepted  as  one  of  its  depositors.  After  this  identification,  he  writes  his 
name  on  a  signature  card  or  in  a  signature  book,  according  to  the  custom  of  that  particular 
bank.  One  should  write  his  lousiness  signature  in  the  exact  form  used  in  signing  checks.  A 
plain,  neat  signature  is  the  most  difficult  to  imitate.  He  then  fills  out  a  deposit  ticket  for  all 
items  deposited  such  as  cash,  checks,  etc.  The  deposit  ticket  with  the  deposit  is  handed  to 
the  receiving  teller,  who  enters  the  amount  of  the  deposit  in  the  bank  pass  book.  The  pass, 
book  is  returned  to  the  depositor  and  serves  as  a  receipt  for  the  amount  deposited  in  the  bank. 
The  signature  card  is  left  with  the  Ijank  so  that  the  paying  teller  may  make  comparisons 
with  the  name  signed  to  the  checks  or  orders  when  presented  for  payment.  The  l);ink  will 
also  furnish,  without  charge,  deposit  tickets  and  an  order  book  known  as  a  check  book. 

Deposits. — Deposit  tickets  are  not  uniform  in  arrangement.  The  ticket  has  a  space  for 
the  name  of  the  depositor  and  the  date.    The  listing  of  the  separate  items  which  make  up  the 

(158) 


BANKING  PRACTICE 


159 


DEPOSIT  TICKET 

Illustration  136 


deposit  is  of  special  importance  to  the  bank.  For  instance,  if  the  deposit  ticket  permits,  the 
specie  should  be  separated  into  gold,  silver,  and  minor  coins.  A  space  is  also  provided  for 
bills.  Arrange  all  bills  in  one  way,  having  the  larger  denominations  at  the  top.  List  each 
check  separately  by  giving  the  name  of  the  bank  or  city  on  which  it  is  drawn.  If  the  bank  is 
an  out-of-town  one,  the  name  of  the  city  or  town  should  be  written  on  the  deposit  ticket. 

This  practice  has  been  changed  to  some  extent  by  the  numerical  system  introduced  by 
the  Federal  Reserve  System.  The  United  States  is  divided  into  twelve  districts.  Each  district 
has  what  is  known  as  a  Federal  Reserve  Bank.  Each  Federal  Reserve  Bank  is  assigned  a 
serial  number.  Other  banks  may  become  members  of  the  Federal  Reserve  Bank  located  in 
the  same  district.  Each  member  bank  is  assigned  a  serial  number.  If  the  member  bank  is 
located  in  one  of  the  twelve  cities  where  a  Federal  Reserve  Bank  has  been  established,  the 
member  bank  will  take  as  its  initial  number 
the  one  assigned  to  the  Federal  Reserve  Bank. 
For  instance,  Pliiladelphia  has  been  assigned  the 
Federal  Reserve  Bank  number  3.  A  member 
bank  located  in  Philadelphia  may  have  a  num- 
ber assigned  to  it  as  follows :  3-87.  The  figure 
3  means  that  it  is  located  in  Philadelphia,  and 
87,  the  number  assigned  to  that  particular  mem- 
ber bank.  Each  state  also  has  a  serial  number. 
The  State  of  Pennsylvania  has  been  assigned 
number  60.  If  a  member  bank  is  located  outside 
of  Philadelphia,  it  will  take  as  its  initial  number 
the  one  assigned  the  state,  and  as  its  final  num- 
ber the  one  assigned  by  the  Federal  Reserve 
system.  For  instance,  a  member  bank  located 
in  Reading  may  have  such  a  number  as  60-93. 
This  nmnber  is  printed  on  the  check  of  the  mem- 
ber bank  and  may  be  used  in  the  listing  of  checks 
upon  the  deposit  ticket. 

District  number  one  includes  the  states  of 
Maine,  New  Hampshire,  Vermont,  Massachu- 
setts, Rhode  Island,  and  the  greater  part  of 
Connecticut.  District  number  two  includes 
the  State  of  New  York,  a  part  of  Connecticut 
and  a  part  of  New  Jersey.  The  central  or 
Federal  Bank  of  district  number  one  is  located 
in  Boston.  The  central  bank  of  district  number 
two  is  located  in  New  York,  The  central  bank 
of  district  number  three  is  located  in  Phila- 
delphia. If  you  have  such  checks  when  making 
a  deposit,  it  is  much  more  convenient  for  the  banker  if  you  write  this  serial  number,  which 
is  printed  on  the  check,  on  the  deposit  ticket  instead  of  using  the  name  of  the  bank  or  city. 


Second  National  Bank 

Philadelphia,  Pa. 

May    1,    19- 
Deposit  of    John  T.    Smith 

Large  Notes 
Small  Notfts 

1 

50000 

93  00 

Silvpr 

80  00 

9  50 

Th^rkR              3-44 

125  00 

60-103 

247 

36 

6£-6 

19 

32 

55-454 

lOO'OO 

Boston,    Mass. 

245 

00 

2 

419 

18 

1 

i 

160  BOOKKEEPING  FOR   MODERN  BUSINESS 

Analysis  of  Deposit  Ticket. — Tho  first  itom  of  SI, 500.00  is  made  up  of  notes  of  the  denomi- 
nation of  s.j.OO  or  inon;. 

Tlie  item  of  S93.00  is  made  up  of  one's  and  two's. 

The  item  of  S80.00  is  made  up  of  gold  coins. 

The  item  of  S9.50  is  made  up  of  silver  coins. 

The  check  for  .S125.00  is  one  drawn  on  the  Franklin  National  Bank  located  in  Philadelphia, 
the  Federal  Reserve  district  number  3. 

The  next  check  is  drawn  on  the  First  National  Bank  of  Johnstown,  Pennsylvania.  The 
State  of  Pennsylvania  has  the  initial  numl)er  GO. 

The  next  check  is  drawn  on  the  Central  National  Bank,  Wilmington,  Delaware.  The 
State  of  Delaware  has  the  initial  number  of  ()2. 

The  next  check  is  drawn  on  the  Riverside  National  Bank,  Riverside,  New  Jersey,  the 
initial  number  of  New  Jersey  being  55. 

The  last  check  is  drawn  on  a  bank  which  is  not  a  member  of  the  Federal  Reserve  system, 
therefore  it  is  necessary  to  write  in  the  name  of  the  city  and  state. 

The  banker  will  record  only  the  total  amount  of  the  deposit  in  the  pass  book. 

Check  Record. — A  check  book  is  furnished  by  the  bank  to  its  depositors.  The  checks 
are  written,  detached  and  given  to  the  parties  to  whom  the  mone}-  is  to  be  paid.  A  record  of 
each  check  is  kept  on  the  stub  of  the  check  book.  Each  deposit  is  recorded  in  the  check  book 
in  the  space  provided  for  that  purpose.  The  deposit  should  be  hsted  in  the  same  way  as  it 
was  listed  on  the  deposit  ticket,  with  the  exception  that  the  name  of  the  drawer  of  the  check 
is  substituted  for  the  Federal  Reserve  number  or  city.  Some  bookkeepers  instead  of  making 
a  copy  of  the  deposit  on  the  back  of  the  stub  of  the  check  book,  have  carbon  copies  made  of 
each  deposit.  The  duphcate  is  filed  away  and  onl}-  the  total  entered  in  the  check  book. 
There  are  many  different  ways  of  keeping  a  check  book.  Three  different  methods  are  shown 
in  Illustrations  137.  138,  139. 

Method  1. — Illustration  137  has  the  distinct  advantage  of  having  the  total  amount  of 
all  deposits  forwarded  to  date  and  this  total  can  easily  be  compared  with  the  statement  which 
the  bank  renders  at  the  end  of  each  month.  It  has  the  disadvantage  of  not  giving  at  first 
glance  the  l)alance  in  bank.  It  is  necessary  for  the  bookkeeper  to  watch  very  carefully  the 
total  deposits  and  the  total  checks  in  order  to  avoid  overdrawing  the  firm's  bank  account. 
To  prov^e  cash,  it  is  necessary  for  the  bookkeeper  to  deduct  the  total  checks  from  the  total 
deposits.    This  difference  will  show  the  amount  of  cash  in  the  bank. 

Method  2. — The  method  shown  in  Illustration  138  is  found  in  many  business  offices. 
It  differs  from  Method  1  only  in  that  the  balance  found  at  the  bottom  of  the  page  of  the  check 
book  is  forwarded  to  the  top  of  the  next  page.  The  sum  of  all  the  checks  on  a  given  page  is 
transferred  under  the  total  deposits  and  tlie  (Ufference  between  the  total  checks  and  the  total 
deposits  is  the  balance  forwarded  to  the  next  page. 

Method  3.— The  method  shown  in  Illustration  139  differs  materially  from  the  other 
two.  Tlie  deposits  are  listed  on  the  back  of  the  stub  as  before.  The  total  of  each  deposit  is 
then  transferred  to  the  face  of  the  check  stub  and  added  to  the  last  balance.  Each  check  is 
deducted  from  the  i)n'vious  balance  and  eacli  tleposit  is  added  to  the  previous  balance.  This 
inetliod  has  the  distinct  advantage  of  always  having  the  balance  in  bank  as  the  last  amount 
on  the  page.  However,  experience  has  shown  that  more  mistakes  in  calculation  occur  when 
this  metluxl  is  used  than  either  method  1  or  2.  The  teacher  will  advise  you  as  to  which 
method  you  sliould  use. 


BANKING  PRACTICE 
luustration  137       (Back  of  Stub)  (Stub  of  Check) 


Joe 

2  /O 
'^OO 
2JO 

/  /^o 

1 

t-^^^^^S'-^i^^'^Z-l^.iZ^^^zi^ 

/  /  ^o 

U(P 

^c^'i'cc^szyt-tai-e-c^ 


C7J 

r  c 


2  OO 


2S 

PC 


'fj 


2  ^O 


1,-2 


2^ 


/^y^\Cj\ 


No.- 


Order  of     //^Ayf^^'hX^ 


For    -^-^--r^  '^2/2 


Amount  of  bill, 
Discount  ^2_  % 
Deposited 


%JO(?.(PC> 

% Coo 


Date 


Order  of  _ 


(layi^^^.^y^^y^    .    ? 


No.- 


-19U=^' 


■^£=i^?«Z5fez-il_ 


For r?-f-7y.  -fg,^^,-/? 


Amount  of  bill, 

Discount To 

Deposited 


Date 


Order  of    (.  ^-trp^.  /C^  „ 

For       [/4a<g<>-Ar.-»;z^^?<^  ^.e^^y-y?-' 


Amount  of  bill,        "  % 

Discount '~o  t 

Deposited . 19_ 


No.^ 

-19  _T 


Date_ 

Orderof,     C^.:;:^ 

For     ^-r:i^;h-fi.2U^.6. 


Amount  of  bill, 

Discount % 

Deposited 


No.-(^  . 

Date      {/ef,-PT.^^i^a^^.- ^ 19,^ 

Order^    tCZ-:^,4^^^^^.^  C^ 

Amount  of  bill,  $_ 

Discount To  * 

Deposited 19 


•../^'C-'i'C^^ayi'Cg^e'i^ 


161 


2^. 


^00 


00 


fo\oo 


77- 


A  00 


y  y^ 


JO 


00 


J  T'^ 


/2J 


yj^/ 


or 


162  BOOKKEEPING  FOR 

iiiustratton  138       (Back  of  Stub) 


MODERN  BUSINESS 

(Stub  of  Check) 


Joe? 
2  /O 

2  JO 


/y  ^O 


t^O 


/  J  U6 


y  y^' oo 


^0 


J6i\^d 


/  0<2 

2^ 

OO 

JiC 

2  V^ 

2J 
OO 

2  OO 

OO 

00 

CL^ 

OO 

/c^W*^^^-»*-t:^<-..^'tf>-^t:^ 

2  W 

<^jy 

7^ 


Order  igf     A'r^^^Jc^'U^  Oj. 
For    -!.^r^T^  ^^/-^ 
Amouot  of  bill, 
Discount  .^2- % 
Deposited 


S. 

S i^-O- 

19 


no i— 

Date     i^^^^z<^--<-<g-<g^^-y — J-, lo— 


Order  of  _ 


For  — i£2Z2<^^=f^ia2^ 


Amount  of  bill, 

Discount % 

Deposited 


NO.-J 


/I' 


Date 

Order  of 

For 

Amount  of  bill. 

Discount  — 

Deposited 


% 


^■<?^i^  C-^L£'C</c<J 


Date_ 


No.-^.^ 


Order'  of     rV.JTTZ^-^iig  Cgv 

For      !!fy^^2-<C!^  ,^^^^  .r2  /■^^^>-t.t,t^.Z^ 


Amount  of  bill, 

Discount % 

Deposited 


Amount  of  bill. 
Discount  -^-  % 
Deposited 


% /ii.OO 


Date-   . 

Order  of     ^C^;^  Vpv^-; 
For  _^ir^ii-cii;i:^l 
Amount  of  bill. 

Discount % 

Deposited 


?^^ 


^<J7^  OO 


ro 


Oj2 


jy¥  ^i 


^o 


o  o 


J  r^ 


OO 


y2J 


s^/ 


OO 


BANKING  PRACTICE 


163 


lUustration  139       (Back  of  Stub) 


3  CO 
2/0 

2JO 


/  /'^O 


(A»'?i*<-<5z-'^^  i^  /a— 


^J5">?J? 


/  ^^ 


/  ^■'  ^ 


2^(P 


2^ 


(Stub  of  Check) 


Amount  of  bill, 
Discount  ^2_  % 
Deposited 


Nc- 
Date    iffx^'y^'^^i^tx^i^^ .     <?,         19^:„ 

For        ^-r^-t^y  .-<r^^^ 

Amount  of  bill,  S 

Discount %  t 

Deposited .19- 


No.-J_ 


For  — 


Amount  of  bill,  S 


Discount  _ 
Deposited 


v-.<;^-;>-^-£«*z2'-^^s8ii-e^^ 


No.--6^ 


^.,<:ryf^ 


-7t^ 


Date_^ , 

Order  «f  O..::^  (C^^v  ft;  (^- 

For ^y^i^A^f/.^r>-i^^  .<7^^.-n^^.-f':^^ 

Amount  of  biU,  S 

Discoimt %  S 


Deposited j/ry^i^y. C^ 


No. 


-19- 


Date 

Order  of J^.J^:,zi^^^i^  /CZt,^^j-^yA^ 

For    -'t.i^^y-'  /  p/^ 


Amount  of  bill. 

Discount    ^  % 
Deposited 


Uf:z^t^^ 


-.C 


^  No-    ^ 

Order  ^  ^~:^l9^J^^.f^  C^ 

For   ^f7-»->-^->g-<;-/>^ 

Amount  of  bill,  $ 

Discount %  S 

Deposited = 19 


i-'<!-C>-^**^4»--^'CZ^<«^ 


^^<>^a 


ro 


ao 


JCC  Z/:o 


J.i,C  ^o 


so 


oo 


3/6 


/i?S 


2S 


Jf// 


6S 


.J'/V 


/  2   y 
2  i/  b 


Oj2_ 


oo 


J  d.y 


/23 


is 


164 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Depositor's  Monthly  Statement. 


Illustration  140 


STATEMENT 

HENRY   BRUCE                      in  ac< 

:oimt 

il  ; 

10 

with 

The  Commerck 

Forth*,  month  of      November 

Bank 

Day 

Checks 

Deposits 

Balance 

00 

Balance  brought  forward 

3,268  40 

2 

250 

50 

1 

3 

160 

00 

5 

247 

30 

- 

6 

421 

85 

9 

148 

75 

940 

11 

27 

30 

12 

236 

50 

15 

142 

30 

Int.              29 

04 

17 

326 

75 

18 

146 

80 

20 
21 

320 

74 

70 

150 

00 

1 

23 

165 

00 

25 

248 

00 

27 

216 

50 

30 

310 

12 

1,748 

1 

Total  Deposits 
for  Month 

1 



2,718 

24 

Total  Credits 

5,986 

64 

Total  Checks 

3.517 

91 
73 

Balance 

2,468 

Business  firms  as  well  as  pri- 
vate individuals  generally  pay  all 
bills  Ijy  check.  A  special  receipt 
is  not  necessary  when  a  bill  is 
paid  in  this  way.  The  check 
should  be  written  with  great  care. 
The  business  man  judges  a  cus- 
tomer to  some  extent  at  least  by 
the  neatness  and  accuracy  of  his 
business  papers.  The  previous 
model  check  books  show  how  the 
stubs  should  be  filled  out.  The 
check  goes  into  the  hands  of 
the  public,  therefore,  great  care 
should  be  exercised  in  preparing 
the  checks.  The  amount,  in  fig- 
ures, should  be  plainly  written 
ver}'  close  to  the  dollar  sign.  This 
is  done  to  avoid  the  raising  of  the 
amount.  The  figures  showing  the 
number  of  cents  should  be  written 
somewhat  smaller  than  those 
showing  the  dollars.  The  amount 
in  words  is  written  on  the  follow- 
ing line.  Begin  writing  the  amount 
in  words  at  the  extreme  left.  If 
there  is  a  blank  space  after  the 
amount  has  been  written,  it  should 
be  filled  in  with  a  neatly  drawn 
line  or  a  waved  or  broken  one.  See 
Illustration  155.  These  checks  are 
stamped  Paid  by  the  bank  when 
presented  for  paj-ment. 

Themodern  bankwillsendto the 
depositor  at  the  end  of  each  month 
a  statement  showing  the  amount 
of  deposits  made  during  the  month 
as  well  as  the  list  of  checks  paid 
during  the  same  period  of  time. 
These  canceled  checks  will  have 
the  endorsement  of  the  payee  on 
the  back,  and  therefore  serve  as 
rrrnpis. 


BANKING  PRACTICE  165 

Monthly  Bank  Statements.— The  bank  statement  (Illustration  140)  will  show  the  amount 
of  your  balance  after  all  checks  which  have  been  presented  during  this  period  of  time  have 
been  paid.  You  should  compare  the  balance  shown  on  this  statement  with  the  balance  which 
you  have  in  your  check  book.  If  all  the  checks  which  you  have  written  have  been  presented 
to  the  bank  and  paid,  the  balances  should  be  the  same. 

Reconciliation  of  Bank  Statement. — If  checks  are  drawn  daily,  it  is  quite  likely  that  some 
of  them  have  not  been  presented  for  payment  when  the  bank  statement  was  prepared,  there- 
fore the  balance  shown  by  your  check  book  would  not  be  the  same  as  that  shown  by  the  bank 
statement.  Upon  receipt  of  the  statement  and  canceled  checks,  arrange  the  checks  numer- 
ically or  by  date  issued. 

Turn  to  the  check  book  and  place  a  check  mark  on  the  stub  of  each  of  the  checks  paid  by 
the  bank  and  make  a  list  of  the  numbers  and  the  amounts  of  those  still  unpaid;  to  the  balance, 
as  shown  by  the  statement,  add  the  sum  of  the  unpaid  checks.  List  all  deposits  which  do  not 
appear  in  your  check  book  and  add  these  to  the  balance  as  shown  by  the  check  book. 
The  two  results  should  agree,  and  if  so,  the  statement  rendered  is  correct.  Illustration  follows. 

Illustration  141 

Reconciliation  of  Bank  Statement 

November  30,  19— 

Balance  per  bank  statement $2,468 .  73 

Checks  not  presented  No.  384 $50.00 

No.  395 128.75 

No.  397 25.80 

No.  399 248.00 

Total  checks  not  paid 452 .  55 

$2,016.18 

Balance  per  check  book $1,987 .  14 

Interest  credited  11/15 29 .04 

$2,016.18 

Some  banks  will  allow  interest  on  the  depositor's  balance.  This  interest  is  credited  to 
his  account  usually  semi-annually.  The  bank's  statement  may  show  that  interest  has  been 
credited  to  the  depositor's  account  during  the  period  of  the  statement.  If  the  interest  has  not 
been  recorded  in  yom-  pass  book  or  in  your  check  book,  add  the  amount  to  your  check  book 
balance  as  a  deposit. 

The  reconciliation  statement  should  be  preserved,  either  by  copying  it  on  the  back  of  the 
stub  of  the  check  book  or  by  filing  it. 

Commercial  Discounts. — There  are  two  kinds  of  commercial  discounts,  namely,  (a)  trade 
discount;   (h)  cash  discount. 

Trade  Discount. — Many  manufacturers,  publishers,  and  wholesalers  issue  catalogues 
describing  their  product.  The  prices  issued  in  the  catalogues  are  usually  higher  than  those  at 
which  the  goods  are  actually  sold.  This  plan  is  adopted  in  order  that  it  may  not  be  necessary 
to  print  new  catalogues  each  time  the  market  price  of  the  goods  rises  or  falls.  Since  the 
catalogue  price  is  usually  higher  than  the  market  price,  they  regulate  their  changes  by 


166  BOOKKEEPING  FOR   MODERN  BUSINESS 

allowing  discounts.  If  tho  market  price  increases,  the  discount  allowed  is  less;  if  the  market 
price  falls,  the  discount  is  increased  usually  by  allowing  a  second  or  a  third  discount  to  be 
deducted  after  the  first  discount  has  been  deducted.  When  two  or  more  discounts  are  allowed 
on  a  bill  they  are  known  as  a  chain  discount  or  a  discount  series.  For  example,  an  article  may 
be  hsted  in  a  catalogue  for  SIOO.OO  less  a  trade  discount  of  40%,  10%,  and  10%.  This  does 
not  mean  that  a  discount  of  60%,  the  sum  of  these  discounts,  is  to  be  deducted,  but  that 
each  discount  in  turn  is  deducted.  Thus,  SIOO.OO  less  40%  =  S60.00;  SOO.OO  less  10%  = 
54.00;  $54.00  less  10%  =  $48.60,  the  final  amount  of  the  bill.  A  trade  discount  of  $51.40, 
therefore,  is  allowed  when  the  discount  series  is  40%,  10%,  and  10%  on  each  .SIOO.OO.  Such 
a  discount  is  deducted  by  the  seller  on  the  bill  which  he  renders  to  the  purchaser,  therefore,  no 
record  of  the  discount  appears  on  the  books  of  either  the  buj^er  or  the  seller.     Thus : 

A  trade  discount  is  a  deduction  made  by  the  seller  from  the  list  or  catalogue  price  of  his 
goods,  for  the  purpose  of  fixing  the  selling  price  to  the  trade. 

Find  the  invoice  cost  if: 

1.  The  list  price  of  a  bill  of  goods  is  $200.00;  the  trade  discount  is  50%,  10%,  and  5%. 

2.  What  would  be  the  invoice  cost  if  an  article  is  listed  at  $450.00  with  a  trade  discount 

of  30%,  10%,  and  23^%? 

3.  What  would  be  the  invoice  cost  in  Example  2  if  the  discounts  were  changed  to  40%, 

20%,  and  5%? 

Cash  Discount. — Price  lists  are  usuallj'  prepared  on  the  basis  of  credit  sales,  and  the 
buyer  is  allowed  a  discount  to  encourage  cash  purchases  or  pa3'ment  within  a  specified  time. 
Such  a  discount  is  deducted  b}^  the  purchaser  in  case  he  takes  advantage  of  the  discount  offered. 
Since  the  goods  are  billed  to  him  for  the  entire  amount,  the  full  amount  is  recorded  on  the 
books  of  both  the  buj-er  and  the  seller.  If  the  buj'er  takes  advantage  of  the  cash  discount 
by  paj-ing  for  the  goods  within  the  specified  time,  the  discount  allowed  must  be  entered  on 
the  books  of  both  the  buyer  and  the  seller.     Thus : 

A  cash  discount  is  a  deduction  allowed  the  buyer  from  the  invoice  price  in  consideration 
of  pajTiient  within  a  specified  time. 

There  are  two  kinds  of  cash  discounts,  namelj^ :  (a)  Discount  on  Purchases;  (6)  Discount 
on  Sales.  The  one  shows  the  amount  of  discount  allowed  to  the  customer  and  the  other  the 
amount  of  discount  allowed  to  the  business. 

Terms  of  Payment 

On  account  (a/c  or  on  a/'c)  means  that  there  is  no  definite  time  when  the  bill  is  to  be  paid. 
It  is  a  business  custom,  however,  that  payment  for  sales  made  on  account  is  due  the  first  of  the 
following  month. 

On  account — 20  days  (a/c — 20  da.)  means  tlmt  the  payment  of  the  bill  is  due  in  20  days 
from  the  date  of  the  sale. 

Cash  less  5%  means  that  a  deduction  of  5%  maj^  be  made  from  the  bill  if  it  is  paiil  at 
once.     However,  it  is  now  a  business  custom  to  grant  a  few  days  for  a  cash  discount. 

5%  10  days — net  30  days  (5'  10,  n  30)  means  that  if  the  bill  is  jiaid  in  10  days  from  the 
date  it  is  is.sued  a  chscount  of  5%  will  Ije  deducted.     The  bill  is  due  in  30  days  without  discount. 

10%  10  days,  5%  30  days,  net  60  days  (lO/lO,  5  30,  n  60)  means  that  if  the  bill  is  paid  in 


DEVELOPMENT  OF  ACCOUNTS 


167 


10  clays  from  the  date  of  issue,  10%  discount  will  be  allowed;  if  not  paid  within  10  days  but 
paid  within  30  days  a  discount  of  5%  will  be  allowed.  The  bill  is  due  at  the  expiration  of  60 
da^'s. 

The  successful  merchant  usually  takes  advantage  of  cash  discounts.  Persons  who  make 
it  a  custom  to  pay  their  bills  within  the  discount  period  have  a  much  better  rating  with  banks 
than  persons  who  do  not.  A  merchant  would  much  rather  sell  to  a  customer  who  pays 
promptly  than  to  one  who  is  in  the  habit  of  allowing  his  bills  to  run  over  the  due  date.  The 
prepa^^nent  of  bills  is  optional  with  the  purchaser. 

If  the  purchaser  takes  advantage  of  the  discount  allowed  him  by  paying  the  invoice  in  the 
time  stated,  he  will  be  increasing  the  profits  of  the  business.  It  is  necessary  to  record  this 
profit  in  an  account  which  will  show,  at  the  end  of  a  business  period,  the  total  amount  gained 
by  paying  invoices  in  time  to  secure  this  discount.  When  the  purchaser  takes  advantage 
of  the  discount,  he  records  the  amount  he  has  gained  in  an  account  called  Discount  on 
Purchases.  The  party  from  whom  the  invoice  was  bought,  or  in  other  words  the  seller,  would 
also  make  a  record  of  the  discount  which  he  has  allowed  to  the  purchaser  in  an  account  called 
Discount  on  Sales. 

Discount  on  Purchases  Account 

The  object  of  keeping  a  Discount  on  Purchases  account  is  to  show  the  amount  of  discount 
allowed  to  us  for  paying  invoices  within  the  discount  period. 

Illustrative  Exercise 

Transactions  relative  to  the  Discount  on  Purchases  account. 

January  1.     Paid  an  invoice  of  merchandise  purchased  on  December  16th,  $500.00, 

less  a  discount  of  5%,  ($25.00). 
2.     John  Jones  allowed  you  a  discount  of  2%  on  an  invoice  of  goods  amounting 

to  $750.00,  ($15.00). 
4.     Paid  John  Smith  for  the  invoice  of  merchandise  bought  on  December 

15th,  terms,  10  10,  5  30,  n/60.     Amount  of  invoice  $365.00,  ($36.50). 
6.     John  Smith  reports  that  he  cannot  allow  more  than  the  5%  discount  on  the 

bill  of  December  15th,     It  was  not  paid  within  the  10%  period. 


Illustration  142 


^^^,/J!^.C.yi.C<p-t^-''M^.-^^^^ 


Ji 


2S 
2jf 


z^- 


jh^n^ 


I  s  "^.-^o*-^.  /-^//i 


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GO 


SO 


Observations. — Credit  the  Discount  on  Purchases  account  to  show  the  amount  of  the 
discount  allowed  to  us  on  invoices  paid  within  the  discount  period. 


168 


BOOKKKKPIXa   FOR   MODERN  BUSINESS 


Debit  the  Discount  on  Purchases  account  to  show  the  amount  of  any  discount  previously 
credited  but  not  allowed  to  us  on  invoices  paid. 

Analyze  the  model  Discount  on  Purchases  account  following  the  method  used  in  analyzing 
the  model  Cash  account  on  page  13. 

The  result  of  this  Discount  on  Purchases  account  shows  that  S58.25  was  allowed  the 
business  for  paying  invoices  within  the  discount  period. 

The  TesuU  of  a  Discount  on  Purchases  account  shows  the  amount  of  discount  allowed  to 
the  business  for  paying  invoices  within  the  discount  period,  found  by  taking  the  difference 
between  the  two  sides  of  the  account.  This  balance  represents  a  profit  to  the  business; 
hence,  the  Discount  on  Purchases  account  is  known  as  a  Profit  and  Loss  account. 

The  balance  of  the  Discount  on  Puichases  account  is  transferred  to  the  Profit  and  Loss 
account  at  the  close  of  the  business  period. 

Exercise  for  the  Student 
Exercise  86 

Prepare  a  ledger  account  for  the  following  transactions. 

May  L     Paid  an  invoice  of  T.  C.  Bell,  -SoOO.OO  less  discount  2%. 

5.     Bought  an  invoice  of  goods  from  Walter  Mason,  $5,000.00,  on  April  loth,  terms, 

o  10,  2  30,  n  GO.     Paid  the  invoice  to-day,  less  the  discount  allowed. 
8.     Paid  an  invoice  amounting  to  §750.00,  less  a  discount  of  5%. 
10.     The  discount  on  an  invoice  of  goods  of  T.  H.  Brown,  which  we  paid  to-dav, 
amounts  to  $17.37. 

Discount  on  Sales  Account 

The  object  of  keeping  a  Discount  on  .Sales  account  is  to  show  the  amount  of  discount 
allowed  to  others  for  paying  their  bills  within  the  discount  period 

Illustrative  Exercise 

Transactions  relative  to  the  Discount  on  Sales  account. 

February  1.     Allowed  John  Mason  a  discount  of  iff  10.00  when  he  paid  a  bill  of  S200.00. 
2.     li.  R.  Kenney  jxiid  his  bill  of  S500.00,  less  u  discount  of  o^c- 
8.     Received  pavment  for  a  bill  of  goods  sold  on  February  1st,  amounting  to 
$750.00,  terms  5/10,  2/30,  n/60. 


Ulustration  143 


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OC 


J5I 


2r 


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Observations:     Debit    the  Discount  on  Sales  account   to  show  the  amount  of  discount 
allowed  to  others  on  hills  ]);iid  within  llic  discount  pci'iod. 


DEVELOPMENT  OF  ACCOUNTS  169 

Credit  the  Discount  on  Sales  account  to  show  the  amount  of  any  discount  previously 
debited  but  not  allowed  by  us  on  bills  paid. 

Analyze  the  model  Discount  on  Sales  account  following  the  method  used  in  analyzing 
the  model  Cash  account  on  page  13. 

The  7'esuU  of  this  Discount  on  Sales  account  shows  that  $72.50  was  allowed  to  others 
for  paying  their  bills  within  the  discount  periods. 

The  result  of  the  Discount  on  Sales  account  shows  the  amount  of  discount  allowed  to 
others  for  paying  then:  bills  within  the  discount  periods,  found  by  taking  the  difference  between 
the  two  sides  of  the  account.  This  balance  represents  a  loss  to  the  business;  hence,  the 
Discount  on  Sales  account  is  known  as  a  Profit  and  Loss  account. 

The  balance  of  the  Discount  on  Sales  account  is  transferred  to  the  Profit  and  Loss  account- 
at  the  close  of  the  business  period. 

Exercises  for  the  Student 
Exercise  87 
Prepare  a  ledger  account  for  the  following  transactions. 
June  1.     Allowed  John  Brown  a  discount  of  5%  on  his  bill  of  $500.00. 

3.     F.  A.  Ray  paid  his  bill  of  $750.00,  dated  June  1st,  terms,  5/10,  2/30,  n/60. 
8.     Received  from  A.  C.  Martin  $194.00  in  payment  of  his  bill  of  $200.00.     What 
was  the  amount  of  the  discount  and  what  was  the  per  cent  of  discount  allowed? 

Exercise  88 

The  transactions  given  in  the  following  exercise  affect  both  the  Discount  on  Purchases 

and  the  Discounts  on  Sales  accounts.    Prepare  the  ledger  accounts. 

December  1.  Paid  our  invoice,  $600.00,  less  a  discount  of  3%. 

3.  Gave  Brown  Brothers  $480.00  in  payment  of  our  invoice  of  November  15th, 

$500.00.     What  was  the  amount  and  per  cent  of  discount  allowed? 

6.  T.  C.  Bell  paid  his  bill  of  $1,000.00  less  a  discount  of  3%. 

8.  Allowed  T.  M.  Jones  a  discount  of  5%  on  a  bill  amounting  to  $300.00. 

10.  Paid  in  cash,  less  a  discount  of  5%,  a  bill  amounting  to  $785.00. 

15.  Allowed  John  McDowell  a  discount  of  3)4%,  on  his  bill  of  merchandise 

amounting  to  $250.00. 

16.  Took  advantage  of  a  3%  discbunt  on  an  invoice  amounting  to  $375.50. 

17.  The  discount  on  an  invoice  of  goods  bought  of  Smith  &  Co.  which  we  paid 

to-day  amounts  to  $48.90. 
19.     Smith  &  Co.  write  us  that  we  have  made  an  error  in  calculating  the  dis- 
count on  the  invoice  paid  on  the  17th;   the  discount  should  have  been 
$47.90. 

Interest  is  the  sum  of  money  paid  for  the  use  of  money.  When  money  is  paid  for  the 
use  of  money  it  is  known  as  Interest  Paid,  and  represents  a  loss  to  the  business.  When  money 
is  received  for  the  use  of  money  it  is  known  as  Interest  Earned,  and  represents  a  profit  to  the 
business.  If  money  is  paid  in  advance  for  the  use  of  money,  it  is  sometimes  called  Discount. 
Discount,  then  is  interest  paid  in  advance.  Since  it  is  considered  a  better  practice  to  treat 
interest  paid  in  advance  as  Interest  Paid,  this  method  will  be  followed  in  this  text. 

The  method  of  reckoning  interest  must  not  be  confused  with  that  of  reckoning  discount 
on  bills  of  merchandise. 


170  BOOKKEEPIXG  FOR   MODERN  BUSINESS 

The  method  of  reckoning  interest  most  commonly  used  is  what  is  known  as  the  Banker's 
Sixty-Day  method.  This  is  based  on  a  commercial  interest  year  of  360  days.  The  principle 
involved  in  the  Banker's  Sixtj'-Day  method  is  as  follows: 

The  interest  on  any  smn  of  money  will  equal  the  principal  in  6,000  days  at  6%. 

If  the  interest  is  100%  of  the  principal  in  6,000  days,  it  would  be  one-tenth  of  the 
principal  for  600  days.  One-tenth  of  the  principal  is  conveniently  found  by  moving  the 
decimal  point  of  the  principal  one  space  to  the  left. 

Tlie  interest  for  60  days  would  be  1/100  of  the  principal.  This  is  found  by  moving  the 
decimal  point  of  the  original  principal  two  spaces  to  the  left. 

The  interest  for  6  days  would  })e  1/1000  of  the  principal.  This  is  found  by  moving  the 
decimal  point  of  the  original  principal  three  places  to  the  left. 

Banker's  Sixty-Day  Method  Illustrated 

Interest  on  S560.00  for  6,000  davs  at  6^ ;  =  .'$560 . 00 
Interest  on  $560 .  00  for  600  davs  at  6^  ^  =  56 .  00 
Interest  on  $560 .  00  for  60  days  at  6^  c  -  5 .  60 
Interest  on  $560 .  00  for         6  days  at  Q%  ^  .  56 

If  the  time  be  some  number  of  days  which  is  an  ahquot  part  of  60  (as  3,  12,  10,  5),  the 
Banker's  Sixty-Day  method  can  be  used  by  the  addition  or  subtraction  of  the  interest  for  the 
fractional  part  of  60. 

Illustration  foUoics: 

Find  the  interest  on  §560.00  for  72  days. 

Interest  on  $560.00  for  60  days,  $5.60 
Interest  on  $560.00  for  12  days,  $1.12 


Interest  on  $560.00  for  72  days,  $6.72 

Another  method  used  in  reckoning  interest,  is  the  simple  one  of  multiplying  the  principal 

by  the  number  of  days,  pointing  off  three  places  to  the  left,  and  then  dividing  by  six.     For 

instance,  let  us  find  the  interest  on  $560.00  for  72  days  at  6%. 

$560.00  X  72  =  40,320 
40,320^-6  =  $6.72 

Interest  is  reckoned  on  interest-bearing  notes  from  the  date  on  which  they  are  drawn  to 

the  date  of  their  maturity.     Discount  is  reckoned  for  the  exact  number  of  daj's  from  the  date 

of  discount  to  the  date  of  maturity  of  the  note.     Some  states  include  the  day  on  which  the 

instrument  is  discounted,  others  do  not. 

Interest  Earned  Account 

The  object  of  keeping  an  Interest  Ivuiicd  account  is  to  show  the  amount  of  interest 
received  ])y  the  business  for  the  u.se  of  money. 

Illustrative  Exercise 

Transactions  relative  to  the  Interest  Earned  account. 

January  1.     Received  a  check  fiom  John  Clray  for  $106.00  in  payment  of  his  note  and 
interest,  face  of  no\v  $1  ()().()(),  interest,  $6.00. 
6.     T.  C.  Mann  paid  you  $3.75,  interest  due  on  an  overdue  account. 
9.     E.  S.   Lane  paid  you  $7.50,  the  interest  on  his  30-day  note  due  to-dav, 
$1,500.00. 


DEVELOPMENT  OF  ACCOUNTS 


171 


Illustration  144 


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Observations.— Crcf/Zi  the  Interest  Earned  account  to  show  the  amount  of  interest 
received  from  others  for  the  use  of  money. 

Dehii  the  Interest  Earned  account  to  show  the  amount  of  anj'  interest  previously  credited 
but  not  allowed  b}-  us. 

Analyze  the  model  Interest  Earned  account  following  the  method  used  in  analyzing  the 
model  Cash  account  on  page  13. 

The  remit  of  this  Interest  Earned  account  shows  that  interest  amounting  to  S17.25  has 
been  received  by  the  business  for  the  use  of  money. 

The  remit  of  an  Interest  Earned  account  shows  the  net  amount  of  interest  received  by 
the  business  from  others  for  the  use  of  money,  found  by  taking  the  difference  between  the  two 
sides  of  the  account.  This  balance  represents  a  ^ojit  to  the  business;  hence,  the  Interest 
Earned  account  is  known  as  a  Profit  and  Loss  account. 

The  balance  of  the  Interest  Earned  account  is  transferred  to  the  Profit  and  Loss  account 
at  the  close  of  the  business  period. 

Exercise  for  the  Student 
Exercise  89 

Prepare  a  ledger  account  for  the  following  transactions. 

February  1.     Received  $318.00  from  F.  E.  Clark,  in  payment  of  his  note  and  interest 
due  to-day.     Face  of  note  $300.00,  interest,  $18.00. 

5.     Received  interest  on  a  loan,  $10.50. 

8.     Received  interest  on  an  overdue  account,  $14.25. 

Interest  Paid  Account 

The  object  of  keeping  an  Interest  Paid  account  is  to  show  the  amount  of  interest  paid  by 
the  business  for  the  use  of  mone^^ 

Illustrative  Exercise 
Transactions  relative  to  the  Interest  Paid  account. 

January  1.     Paid  our  note  and  interest  due  to-day,  $510.00.     Face  of  note  $500.00, 
interest  $10.00. 
5.     Paid  interest  on  our  note  due  to-day  $6.00. 
9.     Paid  John  Colmer  interest  on  our  overdue  account,  $4.25. 


172 

Illustration  145 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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JO 

c- 

CO 

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2S 

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2JS 

20  2S 


20 


Observations. — Dehit  the  Interest  Paid  account  to  show  the  amount  of  interest  paid 
by  the  business  for  the  use  of  money. 

Credit  the  Interest  Paid  account  to  show  the  amount  of  an}'  interest  previously  debited 
but  not  allowed  by  us. 

Analyze  the  model  Interest  Paid  account  following  the  method  used  in  analyzing  the 
model  Cash  account  on  page  13. 

The  result  of  this  Interest  Paid  account  shows  that  interest  amounting  to  $20.25  has  been 
paid  by  tiie  business  for  the  use  of  money. 

The  result  of  an  Interest  Paid  account  shows  the  net  amount  of  interest  paid  by  the  busi- 
ness to  others  for  the  use  of  money,  found  by  taking  the  difference  between  the  two  sides  of 
the  account.  This  balance  represents  a  loss  to  the  business;  hence,  the  Interest  Paid  account 
is  known  as  a  Profit  and  Loss  account. 

The  balance  of  the  Interest  Paid  account  is  transferred  to  the  Profit  and  Loss  account  at 
the  close  of  the  business  period. 

Exercises  for  the  Student 
Exercise  90 

Prepare  ledger  accounts  for  the  following  transactions, 

February  1.     Paid  interest  on  our  overdue  account,  $4.25. 

(Jave  check  for  $303.00  to  pay  our  note  of  $300.00,  and  interest  $3.00. 

Paid  interest  on  our  note  due  to-day  $10.00. 

Paid  the  bunk  $5.20,  the  discount  on  T.  C.  Mason's  note. 


3. 
10. 
12. 


Exercise  91 
Calculate  the  interest  on  the  following  notes  and  prepare  the  accounts.   Open  an  Interest 
Earned  and  an  Interest  Paid  account. 

January  1.     Received  payment  for  a  note  due  to-day.     Face  of  note  $500.00  with  interest 
for  GO  days  at  6%. 
3.     Paid  our  note  due  to-day.    Face  of  note  $350.00  with  interest  for  30  days  at 

6%. 
5.     Paid  John  Smith  the  balance  of  his  account  $325.00  with  interest  for  18  days 
at  6%. 


DEVELOPMENT  OF  ACCOUNTS  173 

January     7.     Received  payment  from  H.  H.  Mann  for  his  note  and  interest  due  to-day. 
Face  of  note  $750.00,  interest  for  50  days  at  6%. 
10.     Received  interest  from  A.  R.  Thomas,  $6.00. 

15.  Paid  interest  on  our  $500.00  note  at  6%  for  36  da}^. 

16.  Paid  4  months'  interest  at  6%  on  our  note  of  $300.00,  held  by  Hudson  &  Co. 

16.  J.  T.  Bond  paid  his  note  of  $350.00  with  interest  at  6%  for  58  days. 

17.  Paid  interest  on  an  overdue  account  in  favor  of  Smith  &  Son,  $2.75. 

19.  Received  interest  from  WiUiams  &  Co.  on  an  overdue  account,  $17.37. 

20.  Prepaid  our  note  in  favor  of  B.  C.  Crayton,  less  a  discount  of  $5.20. 
23.     Discounted  at  the  bank  a  note  for  $300.00  due  in  30  days  at  6%. 

Furniture  and  Fixtures. — In  ever}-  business  it  is  necessary  to  purchase  certain  property, 
which  is  not  to  be  sold  such  as  desks,  chairs,  tables,  counters,  show-cases,  typewriters,  etc., 
but  which  is  to  be  used  in  conducting  the  business.  Property  of  this  kind  must  of  necessity 
decrease  in  value  because  of  its  use.  Desks,  chairs,  typewriters,  etc.,  become  less  valuable 
with  age.  The  use  of  the  property  determines  to  a  certain  extent  the  amount  of  the  decrease 
in  value.  The  decrease  is  more  marked  with  some  property  than  it  is  with  others.  It  is 
rather  difficult  to  recognize  the  decrease  in  value  of  a  desk.  It  is  easier  to  recognize  the 
decrease  in  value  of  a  typewriter.  A  typewriter  which  is  in  constant  use  decreases  in  value 
much  more  quickly  than  other  property  such  as  a  desk.  This  decrease  in  value  of  properhj 
owing  to  age  and  use  is  known  as  depreciation. 

In  determining  the  amount  of  the  decrease  in  value  or  depreciation  of  property,  three 
factors  must  be  considered;  first,  the  original  cost  value;  second,  the  probable  life  or  usefulness 
of  the  property;  third,  the  estunated  value  when  the  property  is  disposed  of.  The  depreciation 
each  year  is  calculated,  by  the  fixed  proportion  method,  on  the  original  cost  value  less  the 
estimated  value  to  be  realized  when  the  property  is  disposed  of.  It  is  estimated  that  a  type- 
writer whose  original  cost  value  is  $100.00  could  be  sold  for  $20.00  at  the  end  of  five  years. 
Since  the  original  cost  value  is  $100.00,  and  the  estimated  value  at  the  end  of  five  years  is 
$20.00,  the  difference,  $80.00  represents  the  decrease  in  value  to  be  distributed  equally  over  a 
period  of  five  years.  Each  year,  therefore,  would  be  charged  with  one-fifth  of  the  $80.00,  or 
$16.00  which  expressed  as  a  percentage  is  16%.  Thus,  16%  of  the  original  cost  value  of  the 
typewriter  is  charged  each  year  at  the  close  of  the  business  period  to  the  General  Expense  or  a 
depreciation  account. 

There  are  two  methods  of  keeping  an  account  with  Furniture  and  Fixtures.  One  method 
is  to  have  the  Furniture  and  Fixtures  account  show  the  cost  value  of  the  property,  and  the 
other  method,  the  present  value  of  the  property. 

When  the  Furniture  and  Fixtm-es  account  is  used  to  show  the  cost  value  of  the  property 
the  original  cost  value  is  neither  increased  nor  decreased  while  the  property  is  in  use.  If  an 
article  which  has  been  charged  to  this  account,  is  sold  or  otherwise  disposed  of,  the  account 
is  credited  with  the  original  cost  value  of  the  property.  Since  property  decreases  in  value 
from  the  time  it  is  purchased,  the  original  cost  price  is  seldom  obtained  for  any  second-hand 
property.  This  decrease  in  value  or  depreciation,  is  a  cost  of  conducting  the  business,  hence, 
the  amount  of  the  decrease  in  value  is  a  loss  to  the  business,  and  is  charged,  at  the  close  of  a 
business  period,  to  the  General  Expense  or  a  depreciation  account. 


174 


BOOKKEEPIXC;   FOR   MODERN   BUSINESS 


When  the  Furniture  and  Fixtures  account  is  used  to  show  the  present  value  of  the  property 
the  amount  of  the  decrease  in  value  of  the  property  is  charged,  at  the  close  of  a  business  period, 
to  the  Cicneral  Expense  or  a  depreciation  account,  and  the  Furniture  and  Fixtures  account  is 
credited.     The  Furniture  and  Fixtures  account  then  shows  the  present  value  of  the  property. 

Furniture  and  Fixtures  Account 
The  object  of  keeping  a  Furniture  and  Fixtures  account  is  to  show  the  value  of  property 
purchased  for  use  in  the  office  and  storeroom  in  which  the  business  is  conducted,  such  as  desks,, 
chairs,  tables,  counters,  show-cases,  typewriters,  etc. 

Illustrative  Exercises 

Transactions  relative  to  the  Furniture  and  Fixtures  account. 

May  1.     At  the  beginning  of  business  the  following  furniture  and  fixtures  were  purchased 
for  office  use:    1  typewriter,    $80.00;    1  typewriter  desk,  §25.00;    1  double 
desk,  $85.00;    4  chairs,  $24.00;  1  safe,  $250.00. 
15.     Purchased  a  rug  for  the  office,  $55.00. 
Purchased  a  vacuum  cleaner,  $100.00. 
30.     The  vacuum  cleaner  purchased  on  the  15th  was  found  to  be  unsatisfactory  and 
was  returned  at  cost  price. 


Illustration  146 


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Observations. — Dehit  the  Furniture  and  Fixtures  account  to  show  the  value  of  the 
property  purchased  for  use  in  the  office  and  storeroom  in  which  the  business  is  conducted. 

Credit  the  Furniture  and  Fixtures  account  to  show  the  cost  value  of  property  which  is 
sold  or  otherwise  disposed  of. 

.Analyze  the  model  Furniture  and  Fixtures  account  following  the  method  used  in  analyzing 
the  model  Cash  account  on  page  13. 


DEVELOPMENT  OF  ACCOUNTS  175 

The  result  of  this  Furniture  and  Fixtures  account  shows  that  property  valued  at  $519.00 
was  purchased  for  use  in  the  office  and  storeroom  in  which  the  business  is  conducted. 

The  result  of  a  Furniture  and  Fixtures  account  shows  the  value  of  property  purchased 
for  use  in  the  office  and  storeroom  in  which  the  business  is  conducted,  found  by  taking  the  differ- 
ence between  the  two  sides  of  the  account.  The  balance  of  the  account  represents  a  value 
owned  by  the  business;  hence,  the  Furniture  and  Fixtures  account  is  known  as  an  asset  account. 

The  Furniture  and  Fixtures  account  is  not  closed  at  the  end  of  a  business  period  unless  it  is 
desired  to  bring  the  balance  down  on  the  same  page  or  forward  the  balance  to  a  new  page. 

Exercises  for  the  Student 
Exercise  92 

Prepare  ledger  accounts  for  the  following  transactions. 

January  1.     Purchased  for  office  use :    1  duplicating  machine,  $50.00;   filing  case,  $48.00; 
1    typewriter,  $100.00;      1  typewriter  desk,  .$40.00;     adding  machme, 
$350.00. 
15.     Returned  for  credit  the  dupHcating  machine  which  was  found  to  be  unsatis- 
factory. 

Real  Estate  is  a  technical  term  that  is  applied  in  elementary  bookkeeping  to  fixed  or 
immovable  property  such  as  land,  buildings,  and  other  improvements  which  make  the  property 
more  valuable. 

Separate  accounts  may  be  kept  for  the  land  and  for  the  buildings  such  as  a  Land  account 
and  a  Building  account.  While  not  much  time  is  gained  by  economizing  in  the  number  of 
accounts  and  in  many  cases  much  time  and  useful  information  is  lost  when  these  accounts  are 
combined  in  a  Real  Estate  account,  yet  the  principles  underlying  the  accounts  are  so  closely 
related  that  the  accounts  may  probably  be  as  well  understood  in  elementary  bookkeeping 
when  the  records  are  made  in  but  one  account.  When  but  one  account  is  kept  it  is  customary 
to  enter  the  separate  items  in  the  ledger  account  with  a  suitable  description  in  the  explanation 
column. 

When  the  Land  account  is  kept  it  is  debited  to  show  the  original  or  appraised  value  of  the 
land  together  with  the  cost  of  all  expenses  incurred  in  obtaining  an  abstract  of  title,  preparing 
papers,  recording  deed,  cost  of  sidewalks,  grading,  and  any  other  improvement  applicable  to 
land.  This  value  should  not  be  increased  nor  decreased  by  means  of  an  inventory  because 
no  profit  can  be  realized  nor  loss  sustained  until  the  land  is  sold. 

When  a  Building  account  is  kept  it  is  debited  to  show  the  original  or  appriased  value  of 
the  buildings  together  with  the  cost  of  additional  improvements  and  a  proportionate  part  of 
the  expenses  incurred  in  obtaining  an  abstract  of  title,  preparing  papers,  recording  deed,  etc.,, 
unless  it  has  been  charged  to  the  land  account. 

It  is  customary  to  designate  the  property  by  its  location,  such  as.  Real  Estate,  210  North 
Broad  St.,  or  House  and  Lot,  37 J  Market  St. 

We  have  learned  that  property  depreciates  in  value  from  the  time  it  is  purchased.  It  is 
possible  that  there  may,  in  many  cases,  be  a  gradual  increase  in  the  value  of  land.  This  does 
not  apply,  however,  in  the  case  of  the  buildings  and  other  improvements.  Buildings  are 
constantly  undergoing  deterioration  as  time  passes.  If  this  be  true  that  depreciation  is 
constantly  taking  place,then  the  net  profit  of  the  business  will  be  affected  in  accordance  with 


176 


BOOKKEEPING  FOR  MODERN  BUSINESS 


whether  or  not  depreciation  is  allowed  to  enter  into  the  accounts.  The  amount  of  depreciation, 
therefore,  is  a  proper  charge  against  the  expense  of  the  business  period,  and  unless  included 
as  an  item  of  expense  the  net  profit  is  incorrectly  stated. 

Real  Estate  Account 

The  object  of  keeping  a  Real  Estate  account  is  to  show  the  original  cost  or  appraised  value 
of  the  land,  buildings,  and  other  improvements  which  make  the  property  more  valuable. 

Illustrative  Exercise 
Transactions  relative  to  a  Real  Estate  account. 

May  1.     Purchased  property  located  at  No.  275  N.  Main  St.,  consisting  of  two  lots  and  a 
store  building,  $15,000.00.     Value  of  lots,  $3,000.00  each. 
2.     Paid  $55.40  for  a  search  of  title  and  recording  of  deed. 
8.     Paid  $120.00  for  a  concrete  walk  around  property. 
12.     Paid  $375.00  to  have  a  garage  erected  in  rear  of  lot. 
28.     Sold  the  vacant  lot  at  cost  price,  $3,000.00. 

Illustration  147 


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Observations. — Dehii  the  Real  Estate  account  to  show  the  original  cost  or  appraised 
value  of  the  land,  buildings,  and  other  improvements. 

Credit  the  Real  Estate  account  to  show  the  original  cost  or  appraised  value  of  any  land  or 
Ijuildings  which  have  been  sold  or  otherwise  disposed  of. 

Analyze  the  model  Real  Estate  account  following  the  method  used  in  analyzing  the  model 
Cash  account  on  page  13. 

The  roiMlt  of  tliis  Real  Estate  account  shows  that  the  original  cost  value  of  the  property 
on  hand  amounts  to  $12,550.40. 

The  result  of  a  Real  Estate  account  shows  the  original  cost  value  of  the  property  on  hand, 
found  by  taking  the  difference  between  the  two  sides  of  the  account.     The  balance  of  the 


DEVELOPMENT  OF  ACCOUNTS 


111 


account  represents  a  value  owned  by  the  business;   hence,  the  Real  Estate  account  is  known 
as  an  asset  account. 

The  Real  Estate  account  is  not  closed  at  the  end  of  a  business  period  unless  it  is  desired 
to  bring  the  balance  down  on  the  same  page  or  forward  the  balance  to  a  new  page. 

Exercise  93 

Prepare  a  ledger  account  for  the  following  transactions. 

April  1.     Purchased  real  estate  at  37  N,  Cherry  St.,  consisting  of  house  and  lot,  $8,500.00. 
Value  of  the  lot,  $2,500.00. 
2.     Paid  agent's  commission,  $42.50. 
14.     Paid  $68.00  for  extension  to  the  porch. 

18.     Sold  a  frame  garage,  which  was  moved  off  the  lot  to-day,  $500.00. 
Find  the  cost  of  the  property  on  hand  at  the  end  of  the  month. 

Insurance  is  a  protection  against  loss,  assumed  by  insurance  companies  upon  the  payment 
of  a  certain  sum  of  mone}^  called  the  'premium.  The  written  contract  issued  by  the  insurance 
company  is  called  the  policy. 

Insurance  may  be  of  various  kinds,  namely,  fire,  marine,  credit,  burglary,  fidelity  and 
surety,  employers'  liability,  life, health,  accident,  etc.  The  usual  practice  is  to  debit  an  Insur- 
ance Prepaid  account  for  the  amount  of  the  premiums  to  show  the  cost  of  all  insurance  paid 
in  advance  upon  real  estate,  stock  of  merchandise  or  other  property,  and  to  credit  the  Insurance 
Prepaid  account  to  show  the  amount  of  any  rebates  or  allowances  on  open  or  canceled  policies, 
and  for  the  proportion  of  expired  insurance  at  the  close  of  each  business  period.  For  example, 
if  the  premium  on  a  policy  for  one  year  amounts  to  $60.00,  the  expired  premium  at  the  end  of 
the  first  month  will  be  one-twelfth  of  $60.00  or  $5.00.  If  the  books  are  closed  at  the  end  of 
the  first  month  the  Insurance  Prepaid  account  would  be  credited  with  $5.00.  The  Insurance 
Prepaid  account  then  shows  the  amount  of  the  unexpired  insurance. 

Insurance  Prepaid 

The  object  of  keeping  an  Insurance  Prepaid  account  is  to  show  the  cost  of  all  insurance 
paid  in  advance  placed  upon  real  estate,  stock  of  merchandise  or  other  property. 

Illustrative  Exercise 
January  1.  Paid  the  premium  on  a  policy  of  insurance  received  from  the  National 

Insurance   Company   for   $6,000.00   on   the   store   building.     The   rate   of 
insurance  is  $1.00  per  $100.00  for  one  year.     The  amount  paid,  $60.00. 
2.  Paid  the  premium  on  a  policy  covering  stock  of  merchandise  for  one 

month,  $5.50. 
31.  The  expired  premium  value  of  the  policy  on  the  store  is  $5.00  (one- 

twelfth  of  $60.00),  and  the  expired  premium  on  the  stock  of  merchandise 
is  $5.50. 


Illustration  148 


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178  BOOKKEEPING  FOR  MODERN  BUSINESS 

Observations. — Debit  the  Insurance  Prepaid  account  to  show  the  cost  of  all  insurance 
paid  in  ad\'ance  placed  upon  real  estate,  stock  of  merchandise  or  other  property. 

Credit  the  Insurance  Prepaid  account  to  show  the  amount  of  any  rebates,  allowances  on 
premiums  from  open  or  canceled  policies,  and  for  the  proportion  of  expired  insurance  at  the 
close  of  each  business  period. 

Analj'zc  the  model  Insurance  Prepaid  account  following  the  method  used  in  analyzing 
the  model  Cash  account  on  page  13. 

The  result  of  this  Insurance  Prepaid  account  shows  the  value  of  the  unexpired  insurance 
on  the  store  building  amounts  to  $55.00. 

The  result  of  an  Insurance  Prepaid  account  shows  the  value  of  the  unexpired  insurance  on 
store  buildings,  stocks  of  merchandise  or  other  property,  found  by  taking  the  difference 
between  the  two  sides  of  the  account.  The  balance  of  the  account  represents  a  value  oumed  by 
the  business;  hence,  the  Insurance  Prepaid  account  is  known  as  an  asset  account. 

The  Insurance  Prepaid  account  is  not  closed  at  the  close  of  a  business  period  unless  it  is 
desired  to  bring  the  balance  down  on  the  same  page  or  forward  the  balance  to  a  new  page. 

The  amount  of  the  expired  insurance  at  the  close  of  a  business  period  may  be  charged  to 
an  Insurance  Expense  account,  or  if  a  more  extended  classification  is  desired,  the  amount  of 
the  expired  insurance  on  the  store  building  ma}-  be  charged  to  a  Real  Estate  Expense  account, 
and  the  amount  of  the  expired  insurance  on  the  stock  of  merchandise  to  the  Selling  Expense 
account.  Whether  an  Insurance  Expense  account  or  a  Real  Estate  Expense  account  is  kept 
the  balance  of  either  account  is  transferred  to  the  Profit  and  Loss  account  when  the  books  are 
closed. 

Cashbook  With  Special  Columns 

The  simple  form  of  cashbook,  which  has  been  used  in  the  previous  sets,  would  prove  sat- 
isfactory in  a  small  business.  In  a  business  where  the  cash  transactions  are  numerous  and 
admit  of  classification,  the  cashbook  is  usually  provided  with  special  columns  to  record  certain 
types  of  cash  transactions.  The  principal  object  of  special  columns  in  any  book  of  original 
entry  is  to  classify  the  transactions  in  such  a  way  that  the  debit  amounts  and  the  credit 
amounts  of  a  particular  account  may  be  posted  as  a  whole  or  total  instead  of  individually, 
thus  avoiding  unnecessary  posting.  The  nature  of  the  business  controls  to  a  certain  extent 
the  needs  of  special  colmnns  and  the  classification  of  accounts.  In  business,  where  cash  dis- 
counts are  allowed  to  customers  and  Ijy  creditors,  the  cashbook  invariably  contains  special 
columns  for  discounts  on  sales  and  on  purchases. 

It  was  shown  in  Part  II  of  the  text  how  the  use  of  the  special  journals,  such  as  the  pur- 
chases journal,  the  sales  journal,  and  the  cash  journals  were  used  to  group  together  certain 
types  of  transactions  in  order  to  avoid  unnecessary  posting.  This  will  be  understood  by  trac- 
ing the  entries  from  the  illustrated  journal  entries  shown  on  page  179  to  the  special  column 
cashbook  in  Illustration  149. 

It  is  evident  that  if  the  three  items  be  posted  separately  from  the  journal  to  the  debit 
side  of  the  Discount  f)n  Sales  account  and  there  added, the  ledger  account  would  show  the  same 
result  as  it  would  if  only  the  total  amount  of  the  special  column  for  Discount  on  Sales  were 
posted.      The  unnecessary  posting  of  each  ca.'^li  discount   allowed  by  us  to  the  debit  of  the 


SPECIAL   COLUMN  CASH  BOOK 


179 


Discount  on  Sales  account  is  avoided  by  adding  a  special  column  to  the  cashbook  and  reserving 
it  exclusively  for  Discount  on  Sales.  An  Accounts  Receivable  column  also  is  added  in  which  is 
entered  the  total  amount  to  be  credited  to  the  personal  account.  For  example,  if  Walter  C. 
Jones  pays  his  bill  of  $300.00,  taking  advantage  of  the  2%  cash  discount,  a  credit  to  his  account 

Model  Journal 
July  3,  19— 


Cash 

Bill, 

6/20-2% 

294 

00 

Discount  on  Sales 

6 

00 

Walter  C.  Jones 

10 

300 

00 

Cash 

Bill, 

6/30-3% 

169 

75 

Discount  on  Sales 

5 

25 

T.  C.  King 

12 

175 

00 

Cash 

Bill, 

7/1-2% 

392 

00 

Discount  on  Sales 

8 

00 

Brown  &  Mason  Co. 

• 

400 

00 

for  the  total  amount  of  the  bill,  $300.00  is  entered  in  the  Accounts  Receivable  column;  $6.00, 
the  amount  of  the  2%  cash  discount,  in  the  Discount  on  Sales  column,  and  $294.00,  the  net 
amount  of  cash  received,  in  the  Net  Receipts  column.  The  $300.00  is  posted  to  the  credit  side 
of  Walter  C.  Jones's  account  but  instead  of  posting  the  cash  discount  separately  the  total 
amount  only  of  the  Discount  on  Sales  column  is  posted. 

Model  Journal 
July  4,  19— 


Henry  R.  Shaw 

Inv. 

6/21-2% 

450 

00 

Discount  on  Purchases 

9 

00 

Cash 

441 

00 

12 

Chas.  A.  Howe 

Inv. 

7/2-3% 

620 

00 

Discount  on  Purchases 

18 

60 

Cash 

601 

40 

16 

Allen  &  Smith 

Inv. 

7/1-3% 

900 

00 

Discount  on  Purchases 

27 

00 

Cash 

873 

00 

Again  by  tracing  the  entries  from  the  illustrated  journal  entries  shown  above  to  the 
special  column  cashbook  it  will  be  observed  that  the  unnecessary  posting  of  the  credit  Dis- 
count on  Purchases  is  avoided  by  using  a  special  column  for  it. 

It  is  evident  that  if  the  three  items  for  the  cash  discount  be  posted  separately  from  the 
journal  to  the  credit  side  of  the  Discount  on  Purchases  account  and  there  added,  the  ledger 
account  would  show  the  same  result  as  it  would  if  only  the  total  amount  of  the  special  column 


180 


BOOKKEEPING   FOR   MODERN  BUSINESS 
CASH  RECEIPTS 


Illustration  149 


ACCOUNT  TO  BE 
CREDITED 


EXPLANATION 


ACCOUNTS 
RECEIVABLE 


DISCOUNT  ON 
SALES  DR. 


NET 
RECEIPTS 


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J/ 
J/ 


2A^O 


/t?«Z-«^Z'?^ 


-z-^^^y 


00 


2S 

00 


^000 

2¥0 
/&^ 

J  ^2 


2S 


6,s  a  s 


dS^.f 


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00 

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00 
00 

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rj- 


for  Discount  on  Purchases  were  posted.  The  unnecessary  posting  of  each  cash  discount 
allowed  to  the  business  to  the  credit  side  of  the  Discount  on  Purchases  account  is  avoided  by 
adding  a  special  column  to  the  cashbook  and  reserving  it  exclusiveh-  for  Discount  on  Purchases. 
An  Accounts  Payable  column  is  added  in  which  is  entered  the  total  amount  to  be  debited  to  the 
personal  account.  For  example,  if  we  pay  Henry  R.  Shaw  for  our  invoice  amounting  to 
S450.00,  taking  advantage  of  the  2%  cash  discount,  a  debit  to  his  account  for  the  total  amount 
of  the  invoice,  §450.00,  is  entered  in  the  Accounts  Payable  colmnn;  S9.00,  the  amount  of  the 
2%  cash  discount  in  the  Discount  on  Purchases  column,  and  $441.00,  the  net  amount  of  cash 
paid  out  in  the  Net  Payments  column.  The  $450.00  is  posted  to  the  debit  side  of  Henry  R. 
Shaw's  account  but  instead  of  posting  the  cash  discount  separately  the  total  amount  of  the 
Discount  on  Purchases  column  only  is  posted. 

It  has  been  observed  that  the  Net  Receipts  column  contains  the  actual  amount  of  cash 
received,  and  the  Net  Payments  column  the  actual  amount  of  cash  paid  out.  In  proving  cash 
when  a  cashbook  with  special  columns  is  used,  it  is  nccessarj'  to  take  into  consideration  the 
amounts  found  in  the  Net  Receipts  and  Net  Payments  columns  only. 

Other  Methods  Illustrated. — Since  the  simple  form  of  tlie  cashbook  which  was  used  in 
the  previous  sets  is  found  in  a  numljcr  of  business  offices,  it  is  essential  that  you  should  know 
liow  to  make  an  entry  for  the  type  of  transaction  just  discussed,  in  the  simple  form  of  the 
cashbook  as  well  as  in  the  special-column  cashbook.     For  instance:   if  a  customer  pays  his 


SPECIAL  COLUMN  CASH  BOOK 
CASH  PAYMENTS 


181 


DATB 

L.F. 

\cr  -OTTT  TO  BE 
DEBITED 

EXPLANATION 

ACCOUNTS 
PAYABLE 

DISCOUNT  ON 
PURCHASES  OR. 

NET 
PAYMENTS 

if- 

4f 

^S<P 

oo 

9 

CO 

Co 

00 

oo 

7 

%-0i^L^9^. 

JL^i^  y^^ 

JZf} 

oo 

J2  0 

oo 

/2 

i20 

oo 

/F 

Co 

2  00 

i>o/ 

0-0 
i^O 

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/S 

yo 

JO 

oo 

/6, 

'        <^ao 

oo 

-?7 

oc 

^/j 

oo 

J/ 

.,.^:!3^t^i^t><?-uyyi^  cryz^ 

^a 

60 

J/. 

Ca^i^  Cu 

2S^^ 

f' 

J/ 

/'J^^-C-n-'yt'C^'^ 

anu^ 

rfTf 

Cj-t^^ 

2^ 

account  or  bill  less  a  certain  cash  discount,  it  is  necessary  to  give  the  customer  credit  for  the 
full  amount  previously  charged  to  his  account.  This  is  done  by  debiting  the  Cash  account  and 
crediting  the  customer  in  the  cashbook  for  the  amount  to  be  credited  to  the  customer's  account. 
It  will  be  seen  at  once  that  you  have  debited  the  Cash  account  for  more  than  the  actual  amount 
received,  therefore  it  is  necessary  to  credit  the  Cash  account  for  the  amount  of  the  discount, 
and  debit  the  Discount  on  Sales  account  for  the  amount  of  the  discount  allowed. 


Cash  Receipts 


lUustration  150 


1- 

DATE 

L.F. 

ACCOUNT  CREDITED 

EXPLANATION 

CASH  DR. 

TOTAL 

s 

^it^^O.Gc^.^^J 

soo 

oo 

Cash  Pajrments 


DATE 

L.F 

iCCOURT  DEBITED 

EXPLANATION 

CASH  CR. 

TOTAL 

J 

„^/2^^i^)i!fr.t^it^^<;'>^j<i^^^z^!£j 

'Mh^^^CJ^^^z^^-^'/o 

<^ 

(PC 

182 


BOOKKEEPING  FOR   MODERN  BUSINESS 


The  entry  just  illustrated  is  known  as  a  cross  entry,  and  has  certain  disadvantages.  The 
total  amount  of  the  cash  receipts  docs  not  show  the  actual  amount  of  cash  received,  nor  does 
the  total  amount  of  the  cash  payments  show  the  actual  amount  of  cash  paid.  The  difference 
between  the  total  amount  of  the  cash  receipts  and  the  total  amounts  of  the  cash  payments 
shows  the  amount  of  cash  on  hand. 

Many  business  firms  and  bookkeepers  prefer  to  make  entries  for  this  t3'pc  of  transaction 
in  yet  another  way.  The  method  used  is  to  debit  the  Cash  account  and  credit  the  customer's 
account  in  the  cashbook  for  the  net  amount  of  cash  received.  A  journal  entry  is  then  made 
debiting  the  Discount  on  Sales  account  and  crediting  the  customer's  account  for  the  amount 
of  discount  allowed.    The  following  illustrations  show  this  method  of  making  the  entries. 


Illustration  151 


Cash  Receipts 


..F. 


J" 


ACCOUNT  CREDITED 


'■^^C^    ^/20.JLi<:/  . 


EXPLANATION 


.<^ 


2f^ 


(PO 


Journal 


■c^-x^^^ 


':'<!--^^^^i^d-i>(^U-^^,.,^^  2  0^g 


CO 


By  making  a  careful  studj'  of  the  three  methods  of  making  entries  for  this  type  of  trans- 
action, it  will  be  seen  that  the  final  result  when  posted  to  the  ledger  accounts  is  the  same. 
When  the  special  column  method  is  used  for  discounts  on  sales  and  discounts  on  purchases 
in  the  cashbook,  it  is  not  necessary  to  use  either  the  simple  form  of  cashbook  or  the  journal 
method. 

Exercises  for  the  Student 
Exercise  94 
Rule  paper  and  prepare  a  special-colmiin  cashbook  for  the  following  transactions. 

May  1.     John  Mason  invested  .SG,000.00  in  the  carpet  and  rug  Inisiness. 
Paid  rent  of  ston^room  located  at  210  Market  St.,  .SIOO.OO. 
Paid  T.  C.  Wrigiit  for  invoice  of  niorclinndisc,  .S^oO.OO,  less  3%. 
H.  S.  Martin  paid  his  bill  of  the  1st  inst.,  $430.00,  less  5%. 
Robert  White  paid  his  note,  .$150.00,  due  to-day. 
Paid  .lames  .J.  Hastings  on  account,  .$300.00. 

Itcceivcd  a  check  from  li.  \\.  Scott  to  apply  on  account,  $500.00 
Paid  telephone  bill  for  tiie  month  of  Aj^rii,  $5.30. 
Received  a  check  from  L.  P.  Ross  in  payment  of  bill  of  .$308.00,  less  3%. 


2. 

3. 

4. 

5. 

(). 

8. 
10. 
11. 


SPECIAL  COLUMN  CASEBOOK  183 

12.  John  Mason  withdrew  $50.00  for  personal  use. 

13.  Paid  .110.20  for  stationery  and  stamped  envelopes. 

14.  Received  a  check  from  J.  K.  Lusk  for  bill  of  1720.00,  less  2%. 

14.  Paid  invoice  of  Jones  &  Co.  of  the  5th  for  $700.00,  less  3%. 

15.  Paid  electric  light  bill,  !s;26.30. 

17.  Paid  note  due  to-dav,  $350.00. 

18.  F.  W.  Earl  &  Co.  paid  their  note  due  to-day,  $720.00. 

Close  the  cashbook,  studying  very  carefully  the  model  given  in  Illustration  149. 

Exercise  95 
April  1.     Balance  from  previous  month  $4,863.20. 

1.  Paid  rent  in  advance  for  the  month  of  April,  $120.00. 

2.  Received  a  check  from  F.  E.  Rogers,  $145.00,  less  1%. 

4.     Received  a  check  from  Frank  Moore  &  Son  $300.00,  to  apply  on  account. 


6.     Paid  invoice  M.  A.  Fell,  for  $625.00,  less  3 


/€■ 


7.  Paid  store  wages,  $68.00. 

8.  J.  E.  Bender  paid  his  note  due  to-day,  $350.00. 

10.     Received  a  check  from  C.  W.  Gray  for  bill  of  $368.00,  less  2%. 
12.     Paid  note  due  to-dav  held  by  Hillis  &  Co.,  $250.00. 
14.     Received  a  check  from  G.  H.  Martin  for  biU  of  $720.00. 
16.     Paid  Shaw  &  Co.,  for  invoice  of  the  4th,  $380.00,  less  2%. 

18.  Paid  Eaton  &  Co.  on  account,  $200.00. 

19.  Received  a  check  from  Stearns  &  Co.,  $500.00,  for  note  due  to-day. 
Close  the  cashbook  as  previously  instructed. 

If  instructed  by  your  teacher,  enter  Exercises  94  and  95  in  a  simple  form  of  cashbook 
showing  the  cross  entries  for  Discount  on  Purchases  and  Discount  on  Sales.  Rule  and  close 
the  cashbooks. 

Also,  enter  Exercises  94  and  95  in  a  simple  form  of  cashbook  showing  only  the  net  cash 
received,  and  the  journal  for  recording  the  Discount  on  Purchases  and  Discount  on  Sales. 
Rule  and  close  the  cashbooks. 


184  BOOKKEEPIXC;   FOR   MODERN   BVSIXE^^ 

THE   WHOLESALE    CARPET   AND    RUG   BUSINESS 
Thomas  B.  Miller,  Proprietor 

This  set  follows  the  same  general  plan  of  business  practice  as  was  given  in  September  and 
October.  Several  new  bookkeeping  features  will  be  introduced  and  a  more  extended  study  of 
the  preparation  and  use  of  the  vaiious  business  papers  will  Ijo  made.  The  use  of  each  will  be 
fully  explained  at  the  point  whore  it  is  introduced,  and  in  connection  with  each  transaction  you 
will  find  such  special  directions  as  you  may  need. 

Thomas  B.  Miller  is  about  to  open  a  wholesale  carpet  and  rug  business  at  487  State 
Street,  Philadelphia,  Pennsylvania.  Having  been  offered  a  higher  salary  and  better  oppor- 
tunity for  advancement  by  Air.  Miller,  you  have  accepted  a  position  as  bookkeeper  and 
cashier  at  a  salary  of  S70.00  a  month.  As  bookkeeper,  you  will  record  the  transactions  as 
they  0CCU1-,  the  work  being  in  this  respect  similar  to  the  previous  month's  work.  As  cashier 
or  agent  for  Mr.  Miller,  you  will  handle  all  cash  received  and  paid. 

It  will  be  necessary  for  you  to  sign  and  endorse  notes,  checks,  receipts,  and  other  business 
papers  as  well  as  keep  a  record  of  the  business  transactions.  On  the  pad  of  Incoming  Vouchers 
you  will  find  a  legal  document  known  as  a  Power  of  Attorney  which  ^Nlr.  :Miller  has  had  pre- 
pared. A  Power  of  Attorneij  is  a  legal  document  empowering  the  person  named  therein  to 
act  in  the  place  of  the  person  signing  it,  in  certain  specified  matters  which  are  named  in  the 
document,  or  in  all  matters  of  a  kind  indicated.  It  is  generally  witnessed  by  a  notary  public, 
who  stamps  the  document  with  his  seal.  Read  the  document  carefully  and  see  what  powers 
it  confers  upon  you.  Fold  the  document  lengthwise  and  brief  it.  Briefing  means  writing  on 
the  back  of  the  document  in  concise,  brief  form,  the  nature  of  the  contents,  as  follows: 

Fold  the  Power  of  Attoryiey  so  that  the 
briefing  will  be  on  the  outside  and  file  it  in 
the  envelope  marked  Voucher  File.  If  this 
brief  form,  showing  the  nature  of  the  con- 
tents, is  placed  on  the  back  of  the  document, 
the  paper  is  easily  located  when  filed  away 
with  other  papers. 

^'aried  selling  price  lists  are  given  in  this 
set  in  order  that  the  work  of  the  students  may 
show  different  results.    A  selhng  price  list  will  be  assigned  by  the  instructor  from  the  numbered 
list  on  page  203. 

No.  1. — November  1.  Take  from  the  pad  of  Incoming  Vouchers  the  envelope  marked  1-a 
Thomas  B.  Miller's  Investment,  in  which  will  be  found  $200.00  in  currency  and  the  bank's 
statement  of  the  amount  of  money  now  credited  to  Mr.  IMillcr's  account.  This  constitutes 
Mr.  ^Miller's  investment  in  this  new  business.  Count  the  cash  and  place  it  in  the  envelope 
marked  Cash  Drawer.  The  $200.00  in  currency  will  be  used  to  pay  small  bills  wliich  will  be 
presented  to  you  from  time  to  time. 

Prepare  a  journal  memorandum  of  the  nature^  of  the  business,  amount  invested,  etc. 

Make  the  proper  entry  in  the  cashl)()()k  for  Mr.  Miller's  cash  investment,  $6,000.00. 
Place  the  amount  in  the  Net  Receipts  column. 


Power  of  Attorney 

between 

Thomas  B.  Miller,  Proprietor 

and 

Student 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


185 


Signature  of 


Business 


Address 


Remarks- 


SECOND  NATIONAL  BANK 

PHILADELPHIA,  PA. 


'^■^i^-^.-y:/<(y^.^ 


No.  2. — November  1.  Mr.  Miller  has  been  keeping  his  money  in  the  Second  National 
Bank.     It  is  not  safe  to  keep  a  large  sum  of  mon(^y  in  the  cash  drawer. 

Since  you  have  been  given  a  Power  of  Attorney,  which  gives  you  the  right  to  sign  checks 
for  Mr.  Miller,  it  will  be  necessary  for  you  to  give  to  the  bank  a  copy  of  your  signature  which 
you  will  use  when  signing  checks.  On  the  pad  of  Incoming  Vouchers,  you  will  find  a  blank 
signature  card  No.2,  on  which  you  will  write  Mr.  Miller's  name  per  your  name,  as  shown  by  the 
following  illustration. 

When  money  is  deposited  in  the  lustration  1S2 
bank,  the  receiving  teller  makes  a  record 
of  it  in  a  receipt  book  known  as  a  pass 
hook.  Mr.  Miller  requested  the  bank  to 
give  him  a  new  pass  book  for  this 
business.  It  will  be  found  among  your 
supplies.  Take  the  pass  book  to  your  in- 
structor, who,  representing  the  bank,  will 
make  a  record  in  it  for  the  $5,800.00,  as 
shown  by  the  bank  statement. 

Banks  furnish  its  depositors  with 
an  order  book  known  as  a  check  hook. 
The     depositor    should    keep    a    strict 

account  of  each  deposit  and  of  each  check  issued,  so  that  he  can  tell,  at  any  time,  the  amount 
of  money  he  has  in  the  bank.  A  check  book  has  been  put  in  your  outfit.  Study  the  three 
methods  of  keeping  the  check  book  which  were  illustrated  in  the  chapter  on  Banking.  Have 
your  instructor  decide  which  method  you  are  to  follow  in  this  set. 

No.  3.— November  1.  Pay  the  rent  for  November  in  advance,  $60.00.  The  building 
at  487  State  Street,  is  rented  from  the  Philadelphia  Real  Estate  Co. 

Pay  the  rent  for  November  in  cash.  Always  make  payment  in  bills  of  the  largest  denomi- 
nations possible.     In  this  instance  you  should  take  one  fifty-dollar  and  one  ten-dollar  bill. 

Detach  the  lease  No.  3  and  receipt  No.  3a  from  the  pad  of  hicoming  Vouchers.  The  lease 
is  a  written  agreement,  in  legal  form,  between  Mr.  Miller,  the  renter,  or  lessee,  and  the  Phila- 
delphia Real  Estate  Co.,  the  landlord  or  lessor.  Read  the  lease  carefully  and  see  what  rights 
and  restrictions  it  mentions.  Brief  the  lease  according  to  the  instructions  for  briefing  the 
Power  of  Attorney  in  the  previous  transaction.  Make  the  necessary  entry  in  the  cashbook 
entering  the  amount  in  the  Net  Payments  column.  File  the  receipt  in  the  Receipts  and  Paid 
Bills  envelope  and  the  lease  in  the  envelope  marked  Voucher  Fik 

No.  4.— November  2.     This  invoice  is  from  the  Mason  Furniture  Co.,  Boston,  Mass. 

The  goods  were  shipped  by  freight.  You  will  receive  on  the  pad  of  Incoming  Vouchers  a 
hill  of  lading  signed  by  the  railroad  company.  This  bill  of  lading  is  a  receipt  from  the  railroad 
company  showing  that  it  had  received  the  goods  in  first  class  condition  from  the  Mason 
Furniture  Co.  and  had  agreed  to  transport  the  goods  to  Philadelphia. 

The  bill  of  lading  should  be  carefully  preserved  by  the  customer,  as  it  must  be  presented 
to  the  railroad  company  in  case  a  claim  is  made  for  damages  or  lost  goods.  File  the  bill  of 
lading  in  the  Voucher  File. 


186 


BOOKKEEPING   FOR   MODERN   BUSINESS 


Perpetual  Inventory. — A  modern  business  custom  is  to  keep  Stock  Record  Cards  on 
which  is  entered  a  record  of  the  quantity  of  each  article  Ijought  and  sold.  The  object  of  theae 
cards  is  to  show  the  quantity  of  goods  on  luind  from  day  to  day.  When  the  goods  are  bought, 
the  amount  is  entered  in  the  bought  column  and  added  to  the  last  balance;  when  sold  the 
amount  is  entered  in  the  sold  column  and  deducted  from  the  last  balance  to  find  the  amount 
of  goods  on  hand.     Illustration  follows: 


Merchandise  Stock  Record  Card 


Illustration  153 


AXMINSTER 

BODGHT  FROM  OR 

SOLD  TO                               Cost 

Bought 

Sold 

On  hand 

\/rz^^ 

/f? 

/Ol^^^ 

2.00 

JO 

JO 

/ 

Z(y 

7^^^2^^.i^^ 

/  o 

i 

1 

i 

I 

j 

No.  5. — November  2.     A  bill  from  the  Rothwcll  Furniture  Co. 

]\Ir.  IMiller  has  O.  K.'d  the  bill  and  instructs  you  to  pay  it  by  check. 

The  stub  of  the  check  should  always  be  filled  in  first,  as  a  delay  in  this  matter  is  often  the 
cause  of  a  great  deal  of  trouble.  The  stub  contains  a  memorandum  of  the  check  and  can  be 
referred  to  after  the  check  has  been  detached  and  delivered. 

Fill  in  the  stub  of  the  check  book  as  shown  in  the  following  illustration. 

Fill  in  the  check  as  follows: 


Illustration  154 


rstub  of  Check) 


/   , 


Date 


Order  of  yA^^2^^^.^.',e/^^v^.^^^^<^^.;<^^y><le^  C^. 


For 

Amount  of  Bill, 

Discount .  % 

Deposited 


-19- 


/SO 


00 


Write  the  date  and  number  of  the 
check.  The  numl)cr  should  be  1  to 
correspond  with  the  number  on  the  stub. 
The  name  of  the  person  to  whom  the 
money  is  to  be  paid  should  be  written 
after  the  words  Paxj  to  the  order  of.  These 
words  mean  that  the  bank  is  to  pay  the 
amount,  named  in  the  check,  to  him  or 
to  any  one  to  whom  the  payee  should 
order  it  paid.  Write  the  amount  of  the 
check  in  figures  on  the  same  line  witii 
the  name.  This  should  be  the  same  as 
the  amount  written  in  words  on  the  next 
Hue. 


WHOLESALE  CARPET  AND   RUG  BUSINESS  187 

Sign  the  check  by  writing  Mr.  Miller's  name  with  your  name  beneath  as  shown  in  the 
following  illustration. 

Illustration  155 


Wn.    /  Philadelphia,  Pa-,     /Zr?-7y^.-<f^-7^/y^^y2\fi- 

SECOND  NATIONAL  BANK 

Pay  to  the  order  »f        A^^^9-^-^-^.^^^^y^^  . yC^-^^^^^i^^^^^.^^^  ( ^^Or^ S  /-.^O  ""^ 

(  yC<^^^ ^^^.^^^--^^^-^rc/^  ^^^— - — -~ Dollars 


Things  to  be  remembered  in  writing  checks: 

1.  Fill  in  the  stub  of  the  check  book  first. 

2.  Fill  in  the  cents  space  with  ciphers,  even  if  the  check  is  for  an  even  number  of  dollars. 

3.  Do  not  leave  a  space  on  the  line  with  the  written  amount. 

4.  Sign  the  check  in  the  same  way  you  signed  the  signature  card. 

5.  If  you  make  an  error  in  writing  a  check  do  not  erase,  but  mark  it  void  and  leave  it 

attached  to  the  stub. 

Enter  the  amount  of  the  check  on  the  credit  side  of  the  cashbook,  thereby  crediting  the 
Cash  account  and  debiting  the  Furniture  and  Fixtures  account.  Write  o^ce  desk  and  chair 
in  the  explanation  column  and  $150.00  in  the  Net  Payments  column. 

No.  6. — November  3.  Invoice  from  Howe  Carpet  Co.,  Kansas  City,  Mo.,  terms  on 
account  10  days  (a/c  10  days). 

Make  an  entry  in  the  purchases  journal  and  on  the  stock  record  cards. 

No.  7. — November  3.     Patterson's  bill  for  books  and  stationery. 

Write  a  check  for  the  amount  of  the  biU.  Fill  in  the  stub  of  the  check  book  before  writing 
the  check. 

No.  8. — November  4.  Order  from  T.  J.  Jackson  &  Co.,  Baltimore,  Md.,  for  a  bill  of 
merchandise,  terms:  note  at  10  days. 

Prepare  a  bill  to  be  sent  to  T.  J.  Jackson  &  Co.,  and  a  duphcate  to  be  filed.  Duplicate 
sale  bills  wiU  be  prepared,  unless  other  instructions  are  given  by  the  teacher.  Verify  your  cal- 
culations and  compare  the  amount  with  the  face  of  the  note.  These  goods  are  to  be  sent  by 
freight.  Prepare  a  Shipping  Order,  to  be  given  to  the  railroad  company,  and  two  receipts 
to  be  signed  by  the  railroad  agent  when  you  deliver  the  goods  to  him.  One  of  these  receipts 
called  the  Bill  of  Lading,  send  to  the  customer  and  the  other  one  called  the  Memorandum  Copy 
file  in  your  Voucher  File.  This  serves  as  a  receipt  for  the  delivery  of  the  goods  to  the  trans- 
portation company. 


188 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Deduct  the  amount  of  the  goods  sold  from  each  stock  record  card,  in  order  to  show  the 
correct  quantity  of  goods  on  hand.      See  illustration  below  showing  card  representing  the 

Ingrain  Carpet. 

Stock  Record  Card 

Illustration  156 


INGRAIN. 

BOnCHT  FROM  OR 

SOLD  TO                            Cost 

Boufht 

Sold 

On  band 

:^ 

2 

/rZtzdi't-i'C/Ctt^i'yt.t^CttAe^C^ 

r/r 

2-/0 

2UO 

V 

^^f2cux4^i<^>t^^CZ. 

/CO 

^j^ 

i                i 

i  1                1 

1   i                  i 

File  the  order  in  the  Orders  file,  the  note  in  the  Notes  Receivable  file,  the  bill  of  lading 
shipping  order  and  bill  in  the  Outgoing  Papers  file  and  the  Memorandum  Copy  in  your  Receipts 
and  Paid  Bills  file. 

No.  9. — November  4.     Invoice  of  merchandise  ordered  by  Mr.  Miller. 

Write  the  note  in  favor  of  J.  Barton  &  Sons'  Carpet  Co.  for  the  full  amount  of  the  invoice. 

No.  10. — November  5.  A  bill  from  the  National  Transportation  Company  for  freight 
on  merchandise  delivered  to  date,  $17.50. 

See  illustration  of  entry  below. 


Illustration  157 


C4■^^l^'^^'.J>f■z<.^^^xyt€iC^     ..^>Uti^^^.^J^C^^ 


^ 


V  ^^ 


Write  the  check  in  favor  of  the  National  Transportation  Company. 

File  the  freight  bill  in  the  envelope  marked  Receipts  and  Paid  Bills. 

No.  11. — November  6.     Order  and  check  from  INIr.  Walter  T.  Thompson,  Louisville,  Ky. 

Prepare  bill  of  lading,  shipper's  order,  and  memorandum  copy. 

Receipt  the  bill  and  deduct  the  articles  from  the  stock  record  cards. 

No.  12. — November  6.      Invoice  of  merchandise  purchased  from  Simpson  Furniture  Co. 

If  you  should  find  an  error  in  an  invoice,  notify  the  teacher  and  ask  for  instructions. 

Hcn^after  the  Ijills  of  lading  will  be  omitted  from  the  incoming  voucher  pad. 

Proof  of  Cash. — Tlic  bookkeeper  should  prove  cash  at  tiie  end  of  each  week  or,  in  a 
business  wliere  there  are  man}^  cash  items,  at  the  end  of  eadi  day.  Proceed  as  follows:  Find 
the  total  amount  of  cash  received  and  cash  paid  by  adding  the  net  receipts  and  net  payments 
columns  of  the  cashbook.  Place  these  amounts  below  the  last  items  in  small  but  neat  pencil 
figures.    On  a  separate  piece  of  paper  deduct  the  total  amount  of  cash  payments  from  the  total 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


189 


amount  of  cash  receipts  and  the  difference  should  equal  the  amount  in  the  cash  drawer  and 
bank.  Prepare^  a  form  as  shown  in  the  following  model,  fill  in,  and  present  it  to  the  instructor 
for  approval. 

Illustration  158 

Proof  of  Cash  on  November  6,  19— 

Cash  receipts ^^'o?nnn 

Cash  payments 


250.00 


Cash  balance $6,346.00 

Represented  by: 

Cash  in  bank '?in'm 

Currency  in  cash  drawer 140 .  00 

Walter  T.  Thompson's  check 596.00 

Total  (which  equals  balance  in  cashbook) $6,346 .00 

No.  13.— November  8.     An  order  from  the  Morris  Furnitm-e  Co.,  Detroit,  Mich. 
No.  14.— November  8.     An  invoice  from  W.  B.  Jones  &  Sons,  Washington,  D.  C. 
Make    the  entry   in   the    purchases 


Illustration  159 


Nc- 


Date- 


/Zr?-7y'^i^i-^.-i^^iey^^ 


U^ 


Order 


For 


journal  for  the  entire  amount  of  the  in- 
voice. Write  a  check  in  favor  of  W.  B. 
Jones  &  Sons  for  the  net  amount  of  the 
invoice. 

You  have  entered  in  the  purchases 
journal  the  total  amount  of  the  invoice 
which  will  be  posted  to  the  credit  side  of 
W.  B.  Jones  &  Sons'  account  in  the  ledger. 
Make  an  entry  on  the  cash  payments  side 
of  the  cashbook,  debiting  W.  B.  Jones  & 
Sons'  account  in  the  Accounts  Payable 
column  for  the  full  amount  of  the  invoice. 
Place  the  amount  of  the  discount  in  the 

special  column  provided  for  Discount  on  Purchases.     Credit  the  Cash  account  for  the  amount 
of  cash  paid  in  the  Net  Payments  column.    Illustration  follows : 


Amount  of  Bill, 
Discount  ^  % 
Deposited 


$^^/. 


/  /.  y 


7-^2 


-19. 


J'^ 


Illustration  160 


^r 


^^. 


^ 


y^^-^z^Q^ 


■r>^<^  2^ 


J^J 


7^ 


No.  15.— November  9.     Fill  this  cash  order  from  John  J.  Howard  &  Co. 

Prepare  a  bill,  deducting  the  2%  discount. 

Enter  the  bill  in  the  sales  journal  for  the  gross  amount. 

Make  an  entry  on  the  cash  receipts  side  of  the  cashbook,  placing  the  gross  amount  of  the 
bill  in  the  Accounts  Receivable  column,  the  discount  in  the  special  column  for  Discount  on 
Sales,  and  the  amount  of  the  check  in  the  Net  Receipts  column. 


190 

Illustration  161 


BOOKKEEPING  FOR   MODERN   Bl\SINESS 


ye^^'ft^j/-  Av-t.t^ciyZ^^'^L.^ot 


ySt:^ ///^     2'^/c 


Jjra 


J" //J     oo 


Illustration  162 


No.  16. — November  0.     Deposit  the  check  received  on  November  6th,  from  Walter  T. 
Thompson,  and  the  one  received  to-day  from  John  J.  Howard  &  Co. 
The  deposit  ticket  was  illustrated  in  the  chapter  on  Banking. 

A  duplicate  copy  may  be  made  for  the  file  of  the  depositor.  Such  duplicates  are  valuable 
for  reference.  As  these  checks  were  made  payable  to  Mr.  Miller  or  order,  endorse  them  to  the 
Second  National  Bank  as  follows: 

List  them  on  a  de- 
posit ticket,  which  j-^ou 
will  find  in  3'our  sup- 
plies, and  place  the  de- 
posit ticket  and  checks 
in  the  pass  book.  Hand 
the  deposit  ticket, 
checks,  and  pass  book 
to  the  receiving  teller 
of  your  school  bank  or 
to  your  instructor.  A 
record  of  the  deposit 
will  be  made  in  the  pass 
book  which  serves  as 
a  receipt  for  the  de- 
posit. If  at  any  time  a 
deposit  is  made  without 
the  pass  book  two  deposit  tickets  should  be  prepared,  one  of  which  the  receiving  teller  will 
stamp  duplicate.  This  duplicate  should  be  taken  to  the  bank  when  the  next  deposit  is  made 
and  the  amount  entered  in  the  pass  book.     Enter  the  deposit  on  the  stub  of  the  check  book. 

No  entry  is  required  in  the  books  of  original  entry,  as  the  money  was  simply  transferred 
from  the  cash  drawer  to  the  bank. 

No.  17. — November  10.  The  Morris  Furniture  Co.  returned  for  credit  one  9  x  12  Wilton 
Rug  at  $45.00,  sold  them  on  the  8th.     It  was  found  to  be  defective. 

It  is  customary  when  returning  goods  for  credit  to  write  a  letter  explaining  why  the  goods 
are  being  returned  and  at  the  same  time  to  render  a  bill,  at  cost  price,  for  the  goods.  Take 
the  letter  and  l)ill  from  the  pad  of  Incoming  Vouchers.  Compare  the  bill  with  the  duplicate 
sales  bill  to  see  if  the  ])vh-v  is  correct. 

If  tile  goods  are  accepted,  send  a  Credit  Memorandum  to  the  firm  returning  the  gootls. 
Fill  out  a  credit  memorandum,  which  you  will  find  among  your  supplies.  This  credit  mem- 
oiaiidurn  is  evidence  that  you  have  accepted  the  goods  and  have  given  the  person  or  firm 
returning  the  goods  credit.     The  following  illusi  rates  the  form  of  a  credit  memorandum. 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


191 


Illustration  163 


Philadelphia,  Pa.,     Nov.    10,    19- 


Memorandum  of  Amount  placed  to  the 

CREDIT 

of  Morris  Furniture  Co. 

275  Darian  St. 

Detroit,    Mich. 

By  THOMAS  B.  MILLER. 


Wilton  Rug  9   X  12 


45.00 


45 


00 


Make  the  entry  for  the  returned  rug  in  the  journal  as  shown  in  the  following  illustration. 
Illustration  164 


yA^e?:^^^^<£^^^^:i-^Upi:i^^l^(Li^ 


:-  t^x  /2,, 


¥S 


CO 


^jr 


0(7 


Debit  the  Merchandise  Sales  account  to  show  the  value  of  all  goods  returned  at  the  selling 
price. 

You  will  find,  by  referring  to  the  record  in  the  sales  journal,  that  the  Merchandise  Sales 
account  has  been  credited  for  $662.40.  As  a  part  of  these  goods  has  been  returned,  the  Mer- 
chandise Sales  account  should  be  adjusted  in  such  a  way  as  to  show  the  actual  amount  of 
goods  sold.  Records  in  books  of  original  entry  should  not  be  altered  or  erased,  therefore  a 
record  of  this  transaction  is  made,  debiting  the  Merchandise  Sales  account  in  order  that  it 
may  show  the  actual  sales. 

Likewise  by  referring  to  the  Morris  Furniture  Co.'s  account  you  will  find  that  their 
account  was  debited  for  the  whole  amount  of  the  bill.  They  should  now  be  credited  for  the 
amount  of  goods  returned.  When  goods  are  returned  to  us,  a  record  is  made  on  the  stock 
record  cards,  adding  the  quantity  returned  to  the  last  balance. 

No.  18. — November  10.  The  rug  received  from  the  Morris  Furniture  Co.  has  been 
returned  by  us  to  the  Howe  Carpet  Co.  for  credit  at  cost  price,  $40.50. 

Write  a  letter,  enclosing  a  bill  for  the  defective  rug,  to  the  Howe  Carpet  Co.,  explaining 
why  the  rug  is  being  returned.     Make  an  entry  in  the  journal  as  follows: 


192 

Illustration  165 


BOOKKEEPIXa   FOR   MODERN  BUSINESS 


^/O  SO 


i^o  so 


You  will  find  by  referring  to  the  invoice  received  from  the  Howe  Carpet  Co.  on  the  3d, 
that  the  record  in  the  purchases  journal  has  been  made  for  the  total  amount  of  the  invoice, 
SI, 275. 10.  Since  a  part  of  these  goods  has  been  returned,  the  Merchandise  Purchase  account 
should  be  adjusted  to  show  the  actual  amount  purchased.  Tliis  is  not  a  sale,  but  a  return  of 
a  previous  purchase. 

When  goods  are  returned  by  us,  a  record  is  made  on  the  stock  record  cards  by  deducting 
the  quantit}'  returned  from  the  last  balance. 

No.  19. — November  11.  Paj'  the  invoice  of  November  2nd,  Mason  Furniture  Co.,  less 
1^/c  discount. 

Calculate  the  discount  and  write  a  check  for  the  proceeds. 

No.  20. — November  12.  This  order,  accompanied  by  a  10-day  note,  is  received  from  the 
Butler  &  Carson  Co.,  Cincinnati,  Ohio. 

Report  No.  4. — Prepare  the  report  and  submit  it  to  the  instructor  for  approval. 

Open  the  following  accounts  in  the  ledger  beginning  on  the  first  blank  page,  three  accounts 
on  each  page  in  the  order  given  below.  Post  all  entries  to  date.  Do  not  post  the  amounts 
in  the  special  columns  in  the  cashbook  for  Discount  on  Sales  and  Discount  on  Purchases  at  this 
time.  This  will  be  done  at  the  end  of  the  month.  ]\Tany  of  the  following  accounts  will  not  be 
used  during  the  month  of  November,  but  will  be  used  during  the  month  of  December. 


Cash. 

Notes  Receivable. 
Merchandise  Inventory. 
Real  Estate. 
Furniture  and  Fixtures. 
Notes  Payable. 
Thomas  B.  Miller,  Capital 
Thomas  B.  Miller,  Personal. 
"Student,"  Capital 
"Student, "  Personal. 
Merchandise  Purchases. 
Freight  Inward. 
Merchandise  Sales. 
Selling  Expense, 
(jcneral  Expense. 
Insurance  Prepaid. 
Interest  Earned. 


Discount  on  Purchases. 

Merchandise  Trading. 

Profit  and  Loss.     (Omit  one  page.) 

Butler  &  Carson  Co.,  2684  Wal)ash  Ave.,  Cincinnati,  Ohio. 

John  J.  Howard  &  Co.,  1216  Market  St.,  City. 

A.  J.  Keister,  247  York  St.,  Nashville,  Tenn. 

A.  C.  Martin,  1007  Vine  St..  Boston,  Mass. 

T.  J.  Jackson  and  Co.,  324  Cherry  St.,  Baltimore,  Md. 

W.  C.  Mills,  138  Grove  Ave.,  Lima,  Ohio. 

Walter  T.  Thompson,  1705  Hill  Ave.,  Louisville,  Ky. 

Morris  Furniture  Co.,  275  Darian  St.,  Detroit,  Mich. 

Wilson  &  Brown,  407  Green  St.,  New  York,  N.  Y. 

(Omit  one  page.) 
Mason  Furniture  Co.,  230  State  St.,  Boston,  Mass. 
Howe  Carpet  Co.,  316  Morris  Ave.,  Kansas  City,  Mo. 
J.  Barton  &  Sons,  309  Black  St.,  Knoxville,  Tenn. 
Simpson  Furniture  Co.,  1446  Cedar  Ave.,  Knoxville,  Tenn. 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


193 


Real  Estate  Expense. 
Interest  Paid. 
Discount  on  Sales. 


T.  M.  Lewis  &  Co.,  349  Water  St.,  Harrisburg,  Pa. 

J.  M.  Lynch  &  Co.,  27  Hill  Ave.,  Albany,  N.  Y. 

W.  B.  Jones  &  Sons,  434  Penn  Ave.,  Washington,  D.  C. 


No.  21.— November  13.  Give  a  10-day  note  to  the  Howe  Carpet  Co.  for  the  balance 
of  the  invoice  bought  on  the  3d. 

No.  22.— November  13.     Fill  this  order  from  Walter  T.  Thompson. 

No.  23.— November  15.  Our  note  of  November  4th,  in  favor  of  J.  Barton  &  Sons 
Carpet  Co.,  is  due  to-day. 

Write  a  check  in  favor  of  J.  Barton  &  Sons  Carpet  Co.  for  the  amount  of  the  note. 

No.  24.— November  15.     This  check  is  from  T.  J.  Jackson  &  Co.  in  payment  of  their 

note  due  to-day. 

No.  25.— November  15.     Mr.  Miller  has  taken  one  9  x  12  Wilton  Rug  for  his  personal 

use,  at  cost  price,  $40.50. 

When  the  proprietor  takes  rnerchandise  for  personal  use,  it  is  customary  to  charge  him 
at  the  cost  price.  A  profit  should  not  accrue  from  a  transaction  with  the  proprietor.  The 
transaction  is  not  considered  a  sale  but  is  treated  as  a  credit  to  the  Merchandise  Purchases 
account.     The  following  journal  entry  should  be  made. 

Illustration  166 


..X^>>*^,;e<^^.2^:i^^/v^i=A?>^^  (^2;.^^>^M-^^7^^-^;^^^i■'^'■<^'^-^*^^ 


/>^2^^<>%<?'7-ti«4ii<£//C*i'^*</5-ez<4i«<s' 


4^^7 


J-J 


The  value  of  the  rug  should  not  be  posted  to  Thomos  B.  Miller's  Capital  account.  The 
capital  invested  should  not  be  impaired  during  a  business  period  but  only  adjusted  at  the  close 
of  such  a  period.  When  Thomas  B.  Miller's  Personal  account  is  debited  it  is  considered  as  an 
amount  which  the  business  had  advanced  to  him.  By  referring  to  his  personal  account  he  can 
tell  how  much  he  has  withdrawn  from  the  business.   Deduct  the  rug  on  the  stock  record  cards. 

No.  26.— November  16.     Write  a  check  in  favor  of  the  Simpson  Furniture  Co.  for 


Check  the  extensions  on  this  invoice  and  verify  the  amount. 
Pay  this  freight  bill  by  check. 
Order  from  T.  J.  Jackson  &  Co.,  terms  on  account. 
Check  from  the  Morris  Furniture  Co.,  in  payment  of  invoice 


$200.00,  to  apply  on  account 

No.  27. — November  17. 

No.  28. — November  17. 

No.  29.— November  18. 

No.  30.— November  18. 
of  the  8th,  less  2%  discount. 

No.  31.— November  18.     The  velvet  carpet  bought  from  Howe  Carpet  Co.  on  November 
17th  was  of  an  inferior  quality  and  you  have  returned  it  for  credit. 

No.  32.— November  19.— Order  from  John  J.  Howard  &  Co.,  terms  on  account. 

No.  33.— November  19.     Invoice  from  J.  Barton  &  Sons  Carpet  Co. 

No.  34.— November  19.     Invoice  from  W.  B.  Jones  &  Sons,  terms,  10-day  note. 

Write  a  note  in  favor  of  W.  B.  Jones  &  Sons  for  the  amount  of  the  invoice. 


194 


BOOKKEEPIXG   FOR   MODERN   Bl' SIX  ESS 


No,  35. — November  20.  This  order  has  been  received  from  Wilson  &  Brown,  who  have 
no  established  credit  which  would  warrant  us  shipping  these  rugs  to  them  before  investigating 
their  financial  standing.  They  have,  therefore,  directed  us  to  ship  the  rugs  to  them  by  express, 
terms  C.  0.  D. 

C.  0.  D.  means  that  you  are  to  receive  the  cash  on  the  delivery  of  the  rugs  by  the  express 
company  to  AVilson  &  Brown  in  New  York.  The  express  company,  acting  as  your  agent, 
will  collect  the  money  before  it  will  deliver  the  rugs  to  Wilson  &  Brown.  The  express  company, 
acting  as  your  agent,  will  forward  the  money  to  you  when  collected. 

Prepare  a  bill  for  the  rugs,  terms  C.  0.  D. 

^lail  the  bill  which  you  have  prepared  to  Wilson  &  Brown.  This  is  done  in  order  that 
they  may  verify  the  bill,  both  as  to  prices  and  amount.  An  abstract  showing  only  the  total 
amount  as  shown  by  the  following  form  is  enclosed  in  the  express  C.  O.  D.  envelope. 


C.  O.  D.  Abstract 


Illustration  167 


Philadelphia,  Pa.,    ^Q^-    ^^  -    19- 

THOMAS  B.  MILLER 

CARPETS     RUGS     FLOORINGS 

SOLD  tn    Wilson  &  Brown, 

Terms  C.O.D.  407  Green  St.,    New  York. 


Merchandise  per  invoice 
forwarded 


70 


00 


Enclose  an  abstract  of  the  bill  in  an  express  C.  O.  D.  envelope  which  will  he  found  among 
your  supplies.  The  rugs  together  with  the  C.O.D. envelope  containing  the  abstract  of  the  sale, 
are  delivered  to  the  agent  of  the  express  company  at  Philadelphia.  Upon  the  anival  of  the  rugs 
in  New  York  the  express  company  will  deliver  the  rugs  to  Wilson  &  Brown  upon  the  payment 
of  §70.00.  The  agent  of  the  express  company  at  New  York  will  receipt  the  abstract  of  the 
bill  and  give  it  to  Wilson  &  Brown.  On  the  face  of  the  C.  O.  D.  envelope  write  Thomas  B. 
Miller's  name  and  address  as  shown  in  the  following  form: 


WHOLESALE  CARPET  AND   RUG  BUSINESS 


195 


Illustration  168 


If  not  deUvered  in  Three  Days, 
return  to 


COMMERCIAL  EXPRESS  COMPANY, 


Place 

Postage 

Stamp 

Here 


POSTMASTER 
FORWARD  TO 


On  the  back  of  the  C.  O.  D.  envelope  fill  in  the  necessary  information  as  shown  in  the 
following  form : 
Illustration  169 


G.  0.  D. 


FOR   GOODS   SHIPPED   TO 

Wilson  &  Brown, 


407  Green  St 


No. 

Waybilled  frorti- 


New  York. 


Date 


19. 


Amount  of  C.  0.  D.  $- 
Charge    for    Collecting 
and  return  of  proceeds  $- 


Are  above  charges  to  be  j     YES 
collected  from  consignee  {      NO 
Unless  otherwise  instructed,  desti- 
nation office  will  so  collect. 


POSTMASTER— Please  forward   to  address  on   reverse  side 


Some  bookkeepers  will  charge  the  amount  of  the  C.  0.  D.  sale  to  the  express  company 
instead  of  charging  it  to  the  account  of  the  party  to  whom  the  merchandise  was  sold,  because 
the  express  company  is  responsible  for  the  payment  or  return  of  the  merchandise.  When 
this  method  is  followed  the  name  of  the  express  company  should  be  followed  by  the  letters 
C.  O.  D.  when  the  account  is  opened  in  the  ledger.  In  this  text  you  will  charge  the  amount 
of  the  bill  direct  to  the  customer's  account. 

Place  the  C.  0.  D.  envelope  with  the  abstract  enclosed  in  the  envelope  marked  Outgoing 
Papers. 

The  posting  for  each  C.  0.  D.  sale  should  be  done  immediately  after  the  sale  has  been 
entered  m  the  sales  journal.  No  entry  is  made  for  the  cash  until  it  is  received  from  the  express 
company. 

No.  36.— November  20.  Fill  Butler  &  Carson  Co.  order,  which  is  accompanied  by  his 
30-day  note  in  payment. 

No,  37. — November  20,    Discount  the  note  received  from  Butler  &  Carson  Co. 


196 


BOOKKEEPING   FOR   MODERN  BUSINESS 


DISCOUNT  MEMORANDUM 


.  yCA^tP-. 


Date. 


/^c^-z^ 


2(?       19^ 


Remove  the  note  from  the  file  and  endorse  it  to  your  bank  as  shown  in  transaction  No.  16. 
The  note  is  due  December  18th.  The  day  on  which  the  note  is  discounted,  November  20th, 
is  known  as  the  date  of  discourU.  The  discount  on  S24G.00  for  28  days  at  69c  is  $1.15.  Bank 
discount  is  found  by  taking  the  simple  interest  on  the  face  of  the  note  for  the  time  in  days  from 
the  date  of  discount  (November  20th)  to  the  date  of  maturity  (December  18th).  Deducting 
Illustration  170  the  bank  discount  (SI.  15)  from  S246.00, 

gives  the  net  proceeds,  S244.85,  which  will 
be  placed  to  your  credit  in  the  bank. 

Take  a  discount  memorandum  from 
your  envelope  containing  your  supplies 
and  fill  it  out  according  to  form  in  illus- 
tration 170. 

Attach  the  memorandum  to  the  note 
and  hand  them  with  j^our  pass  book  to 
the  discount  clerk  or  instructor,  who  will 
enter  the  net  proceeds  in  your  pass  book. 
Add  the  net  proceeds,  S244.85,  as  a 
deposit  on  the  stub  of  your  check  book. 


Discounted  for     ■  y^z-ip'>9-r.-f:z^  ~A^  /7Z^^^^^^ 
Indorser 


Face  $  2^L0<P     Interest  $- 
Disc.j^S  /  /5 CoU.  $. 


Total  t2^C>.00 

Total  $ /IS. 

Proceeds  %2j/^.R5 


Illustration  171 


/^e?-z^ 


2  (P 


2¥<^    (2 a 


/    /^ 


2¥^ 


85 


When  a  note  is  discounted  at  the  bank  you  will  receive  credit  for  the  value  of  the  note  on 
the  day  discounted.  Make  the  entry  on  the  cash  receipts  side  of  the  cashbook,  debiting  the 
Cash  account  and  crediting  the  Notes  Receivable  account  for  the  net  amount  or  actual  cash 
received,  in  the  Net  Receipts  column. 

Illustration  172  _ 


2^ 


yi^^-^^,iO>^^:,^.£:tAiz,A^~:^^^ 


2W 


JSS 


This  does  not  credit  the  Notes  Receivable  account  for  the  face  value  of  the  note,  there- 
fore it  is  necessary  to  make  a  journal  entr}-  adjusting  this  account.  The  journal  entry  should 
be  made  as  follows: 

Illustration  173 


.^^LJk.d'^.^'-t-t.'yi-C'^^'^zy  /jCc*2ii£^-<4^**'C^ 


/  5 


J  S 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


197 


It  is  not  good  practioo  to  ontor  tho  disoount  on  a  note  in  the  special  columns  provided  for 
Discount  on  Sales  and  Discount  on  Purchases.  As  there  is  no  special  column  for  discount  in 
the  cashbook  in  this  set,  it  is  necessary  to  use  a  journal  entry  to  make  the  adjustment.  It  is 
possible  to  make  the  cross  entry  in  the  cashbook  which  was  illustrated  for  the  Discount  on 
Sales  when  the  simple  form  cashbook  is  used.  Since  a  cross  entry  has  the  distinct  disadvantage 
of  not  showing  the  actual  amount  of  cash  received,  it  is  avoided  in  this  text. 

No.  38.— November  22.     Check  in  payment  of  Butler  &  Carson  Co.'s  note  due  to-day. 

No.  39. — November  22.     Deposit  the  checks  which  you  have  in  the  cash  drawer. 

No.  40.— November  22.     Pay  the  Simpson  Furniture  Co.,  by  check,  .1150.00,  on  account. 

Report  No.  5.— Prepare  a  report  and  hand  it  to  your  instructor  for  approval.  Post  all 
transactions  to  date. 

No.  41. — November  23.  The  express  company  has  returned  the  C.  0.  D.  collection  of 
November  20th,  by  sending  you  two  express  money  orders  for  $69.50.  They  have  deducted 
50^  as  their  charge  for  collecting  and  returning  the  money. 

Express  money  orders  are  not  made  for  a  sum  larger  than  $50.00.  Since  Wilson  &  Brown's 
bill  amounted  to  $70.00,  from  which  the  express  company  retained  50f^,  the  agent  for  the 
express  company  made  out  two  express  money  orders,  one  for  $50.00  and  another  for  $19.50. 

Express  money  orders  are  regarded  as  cash.  Make  an  entry  on  the  cash  receipts  side  of 
the  cashbook  debiting  the  Cash  account  and  crediting  Wilson  &  Brown's  account  for  the 
value  of  the  two  express  money  orders.  Place  the  amount  in  both  the  Net  Receipts  and  Account 
Receivable  columns,     An  illustration  of  the  journal  entry  follows: 

Illustration  174 


Oiec-^^ta^yt-aj-Lrt^Tiy  C^  C£,Z^mJ2^. 


No.  42.— November  23.  Write  a  check  in  favor  of  the  Howe  Carpet  Co.,  in  payment  of 
our  note  due  to-day. 

No.  43. — November  23.  This  check  was  received  from  Walter  T.  Thompson  in  payment 
of  bill  due  to-day,  less  discount. 

No.  44. — November  24.     Invoice  from  the  Mason  Furniture  Co.,  terms  cash  less  2%. 

No.  45. — November  24.  Fill  this  C.  0.  D.  order  for  one  6x9  Axminster  Rug  and  one 
9  X  12  Axminster  Rug  for  A,  C.  Martin,  Boston,  Mass. 

No.  46.— November  25.     Fill  this  order  from  the  Morris  Furniture  Co.,  terms  on  account. 

No.  47.— November  25.  The  National  Transportation  Co.  has  presented  their  bill  for 
freight  and  drayage  to  date,  $16.72.     Pay  the  bill  in  cash  from  the  cash  drawer. 

No.  48. — November  26.  The  express  company  has  returned  the  C.  0.  D,  collection  of 
November  24th  by  sending  us  an  express  money  order. 

They  have  charged  25^  for  collecting  the  bill. 


198 


BOOKKEEPIXC   FOIi   MODERX   IW  SI  NESS 


No.  4Q. — November  26.  This  .30-day  note  for  S500.00  was  received  from  the  Morris 
Furnitui-e  Co.  to  apply  on  account  of  bill  sold  on  the  2oth. 

No.  50. — November  27.  Fill  this  order  from  Butler  &  Carson  Co.,  which  is  received  with 
a  60-day  note  in  full  pajTnent  of  the  bill. 

No.  51. — November  27.  Discount  at  the  bank  the  note  received  to-day  from  Butler  & 
Carson.  Prepare  the  discount  memorandum.  Enter  the  proceeds  on  the  stub  of  your 
check  book  and  add  to  your  previous  balance.     Make  cashbook  and  journal  entries. 

No.  52. — November  29.     Write  a  check  in  payment  of  our  note  due  to-day. 

Write  a  30-day  note  for  S300.00  in  favor  of  the  Howe  Carpet 


No.  53.— November  29. 
Co.  to  apply  on  account. 
No.  54. — November  29. 
No.  55.— November  30. 
No.  56.— November  30. 


Invoice  from  the  J.  Barton  &  Sons'  Carpet  Co. 
Fill  this  order  from  Walter  T.  Thompson,  terms  2/10  n/30. 
Your  salary  for  the  month  of  November  is  due.     Write  a 
check  for  $70.00  in  favor  of  yourself. 

No.  57. — November  30.     Deposit  all  checks,  express  money  orders,  and  cash  on  hand. 
No.  58. — November  30.     Thomas  B.  Miller  desires  to  have  the  balance  of  his  personal 
account  transferred  to  his  capital  account. 

^lake  a  journal  entry  debiting  his  Capital  account  and  crediting  his  Personal  account 
Illustration  follows: 
Illustration  175 


.7^ 


.,a..c-c-<p-it--yt'Z^/c^C-€:i^^ti^ci^--£t-C't.<^T'i''-^^ 


V£> 


SO 


'/O 


so 


On  the  pad  of  Incoming  Vouchers  will  be  found  a  statement  from  the  Second  National 
Bank  which  shows  the  balance  in  bank  to  the  credit  of  Thomas  B.  Miller. 

Prcjiare  a  reconciliation  of  the  bank  statement. 

Report  No.  6. — Prepare  the  report,  and  post  all  transactions  to  date. 

Closing  the  Books  of  Original  Entry. — Foot,  rule  and  check  the  books  of  original  entry 
and  post  the  totals  of  each  to  their  respective  accounts  in  the  ledger. 

Post  the  total  of  the  Discount  on  Sales  column  in  the  cashbook  to  the  debit  side  of  the 
Discount  on  Sales  account,  and  the  total  of  the  Discount  on  Purchases  column  to  the  credit 
side  of  the  Discount  on  Purchases  account.  Prepare  a  trial  balance  and  have  it  approved  by 
the  instructor.     Send  statements  to  customers. 

Inventory  Record. — The  principal  object  in  keeping  the  stock  record  cards  is  to  be  able 
to  ascertain  at  any  time  the  quantity  of  merchantlise  on  hand.  It  is  necessary  that  these 
cards  be  accurately  kept  in  order  to  show  the  exact  amount  of  unsold  goods  at  the  end  of  the 
business  period. 

Find  the  value  of  the  merchandise  inventory  at  the  latest  cost  price. 

The  furniture  and  fixtures  are  valued  at  cost  price,  S150.00. 


WHOLESALE  CARPET  AND   RUG  BUSINESS 


199 


The  following  work  is  now  required : 

1.  Prepare  a  Working  Sheet  as  previously  instructed. 

2.  Prepare  a  Profit  and  Loss  Statement. 

3.  Prepare  a  Balance  Sheet. 

4.  Make  the  closing  entries  and  rule  the  ledger  accounts. 

5.  Prepare  a  Proof  Trial  Balance. 

Illustration  176 

Profit  and  Loss  Statement 
November  1 — November  30, 19 — 


Gross  Merchandise  Sales 
Less — returned  sales 

Net  sales 
Merchandise  Purchases 

Less  returned  purchases  _ 

Net  purchases 

Add — Freight  Inward 

Total  cost  of  purchases 
Deduct — 
Merchandise  inventory,  Nov. 

Cost  of  merchandise  sold 

Gross  profit  on  sales 

1 
xxxx  XX 

XXX  XX 

xxxx 

XX 

XX 
XX 

XXXX 

xxxx 

xxxx 
xxxx 

XX 
XX 

XX 

XXXX  XX 
XX  XX 

30,  19— 

XX 

XXX 

XX 

Other  income 

Discount  on  Purchases 
Gross  income 

XX 

XX 

XXX 

XX 

1 

Deduct  from  income — 
Selling  Expense 
General  Expense 
Discount  on  Sales 
Interest  Paid 

Net  profit 

X 

XXX 

X 

XX 

XX 
XX 
XX 
XX 

XXX 

XX 

XXX 

XX 

1 

1 

Explanation  of  the  Profit  and  Loss  Statement.— The  amount  of  the  gross  sales,  repre- 
senting the  total  value  of  the  merchandise  sold,  is  found  on  the  credit  side  of  the  Merchandise 
Sales  account;  the  returned  sales  on  the  debit  side.  The  difference  or  net  sales,  is  the  amount 
found  in  the  trial  balance. 

The  gross  purchases,  representing  the  total  value  of  the  merchandise  purchased,  is  found 
on  the  debit  side  of  the  Merchandise  Purchases  account;  the  returned  purchases  on  the  credit 


200 


BOOKKEEPING  FOR   MODERN   BC  SI  NESS 


side.  The  difference,  net  purchases,  is  the  amount  found  in  the  trial  balance.  Since  the  freight 
charges  increase  the  cost  of  the  merchandise  purchased,  the  amount  found  in  the  Freight 
Inward  account  is  added  to  the  net  purchases  to  show  the  total  cost  of  merchandise  purchased. 
The  cod  of  merchandise  sold  is  found  by  deducting  the  value  of  the  present  inventory  from  the 
total  cost  of  merchandise  purchased.  The  amount  is  extended  into  the  second  money  column 
as  it  is  to  be  deducted  from  the  net  sales,  The  gross  profit  on  sales  is  found  by  deducting 
the  cost  of  merchandise  sold  from  the  net  sales. 

The  amount  found  in  the  Discount  on  Purchases  account  represents  an  additional  income. 
This  amount  added  to  the  gross  profit  on  sales  gives  the  gross  income  of  the  business.  The 
tunounts  found  in  the  Discount  on  Sales  account,  the  Interest  Paid  account  the  Selling  Expense 
account  and  the  General  Expense  account,  representing  amounts  allowed  to  others  or  paid 
out  for  expenses  incurred  in  the  management  of  the  business,  are  deducted  from  the  gross 
income  to  show  tlie  net  profit  of  the  business  for  the  business  period. 

ClosiDg  Entries. — Illustrations  were  given  at  the  end  of  October  for  the  closing  entries. 
Close  the  accounts  in  the  same  order  as  they  were  used  in  making  the  profit  and  loss  statement. 
The  Freight  Inward  account  is  an  additional  cost  to  the  merchandise,  therefore  it  should  be 
closed  into  the  Merchandise  Purchases  account,  which  wall  correspond  to  the  step  in  the 
statement  showing  the  total  cost.  The  illustrations  which  follow  will  show  the  necessary 
journal  entries  to  close  the  accounts  not  used  in  the  October  work. 

The  amounts  used  in  the  following  illustrations  may  not  be  the  same  as  those  found  in 
your  ledger. 
Illustration  177 

'SO 


Method  of  closing  Freight  Inward  account  into  the  Merchandise  Purchases  account. 

Illustration  178 


V 


^ 


'S^^^ 


2S 


/^ 


^^-f^^7^'i^^, 


so 

2S 


'9- 


Jo 


^J 


..2J- 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


201 


The  following  illustrations  show  the  closing  of  the  Discount  on  Purchases  account.     The 
object  is  to  transfer  the  income  shown  by  this  account  to  the  Profit  and  Loss  account. 


Illustration  179 


S^ 


lustration  180 


-'CifLe^ 


2S 


V^V 


2S 


i/a 


/c^cn^ 


Ji:? 


2.S 


^^ 


JO 


w^^^T^S-!^  Cy 


2S 


Jl^ 


W 


^£^ 


II 

The  following  illustration  shows  the  closing  of  the  Discount  on  Sales  account.     The  object 
is  to  transfer  the  loss  shown  by  this  account  to  the  Profit  and  Loss  account. 


Illustration  181 


/^:^2^^9=-<=;^ 


\3a 


9^^.^t^xd<^ 


^='^^-Si^^i^>i:^-z^i.--f'z/^cP-7-zy>dCt^^ 


2S^ 


Illustration  182 


y^i^dU>t2'l-^^'-Z^  (py^t^ 


a<^ 


r  i 


-rr- 


A^cn^ 


JO 


^yCiP-uz^  (-^ 


/C 


^7 


S^p-ly^ 


JO 


9^Jh<idf 


r 


2S' 


67 


The  Interest  Paid,  Selling  Expense  and  General  Expense  accounts  are  closed  in  the  same 
way.  The  following  illustrations  show  the  necessary  journal  entry  to  close  the  Profit  and 
Loss  account  and  to  transfer  the  net  profit  to  the  proprietor's  Capital  account. 


202 

Illustration  183 


BOOKKEEPlXiJ  FOR   MODERX  Bi' SIX  ESS 


^^c? 


y  XX.  pf.x 


Illustration  184 


0^. 


J0 

,.Z^ii^i«?t4^n/'a>t<x:fa^i^ 

X  X 

X  X 

30 

../.4<i^:U^^yCH>C<n<^KZ^\l 

I  X  X 

J(A 

So 

£^tZU^-^i^:<^  / 

X 

X  X 

Jo. 

.J2Zic<?u^^^t7?u^ii4^J^aJ^t^U■ 

XX 

XX 

so , 

J<£?^^KM'<^J^  (o^e^!^2^^■yud^^ 

XXX. 

X  X 

JO  , 

v^/^4tr*ruaj'^ 2it:^4/C^^ 

XXX. 

XX 

X  XX 

XX 

j  ;f  ^  X 

// 

i 

Percentage  Results  Often  Required. — Comparisons  are  usually  made  on  a  percentage 
basis.  Any  increase  or  decrease  in  merchandise  purchases  or  merchandise  sales,  or  in  the 
profits  or  losses  for  the  business  period  are  expressed  on  a  percentage  basis  instead  of  by 
amounts.  For  example,  if  the  merchandise  sales  for  one  year  were  $50,000.00,  and  for  the 
next  year  were  $75,000.00,  instead  of  saying  that  there  had  been  an  increase  of  $25,000.00  in 
the  merchandise  sales  it  would  be  expressed  as  an  increase  of  50%. 

Find  the  percentages  called  for  in  the  following  exercises  for  Thomas  B.  Miller's  profit 
and  loss  statement  for  the  period  closing  November  30,  19 — .  Keep  your  results  for  a  subse- 
quent exercise. 

1.  What  is  the  rate  of  gross  profit  on  sales;   on  the  cost  of  sales?     (Exercise  37.) 

2.  What  is  the  rate  required  to  be  added  to  the  cost  price  to  meet  the  selling  expenses? 

(Divide  the  total  selling  expense  by  the  cost  of  goods  sold.) 

3.  What  is  the  rate  required  to  be  added  to  the  cost  price  to  meet  the  general  expenses? 

(Divide  the  total  general  expense  b}^  the  cost  of  goods  sold.) 

4.  What  is  the  rate  required  to  be  added  to  the  cost  price  to  meet  all  expenses?     (Divide 

the  total  expense  by  the  cost  of  goods  sold.) 

5.  What  is  the  rate  required  to  })e  added  to  the  gross  profit  to  meet  the  selhng  expenses? 

(Divide  the  total  selling  expense  In'  the  gross  piofit.) 

6.  What  is  the  rate  required  to  be  added  to  the  gross  profit  to  meet  the  general  expenses? 

(Divide  the  total  general  expense  by  the  gross  profit.) 

7.  What  is  the  rate  required  to  b(>  added  to  the  gross  profit  to  meet  all  expenses?     (Divide 

the  total  exp(^nse  })y  the  gross  profit.) 

8.  Wliat  is  the  per  cent  of  the  net  profit  on  the  capital  for  the  period?     (Divide  the  net 

profit  l)y  the  capital  for  the  period.) 

Review  Questions :  1.  What  i§  a  Power  of  Adorney?  2.  How  do  you  brief  a,  legal 
document?  3.  What  is  a  lease?  4.  What  is  a  l^ill  of  Lading?  5.  What  is  the  oliject  of 
keeping  tiie  stock  record  cards?  6.  AMiat  is  a  Special  or  Full  Indorsement?  7.  \Vhat  is  a 
credit  memorandum?     8.  What  is  a  C.  O.  D.  sale? 


WHOLESALE  CARPET  AND  RUG  BUSINESS 

SELLING   PRICE   LIST   FOR   NOVEMBER   AND    DECEMBER 


203 


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Axminster  Rugs,  6x9 

$12.50 

.$12.45 

$13.00 

$12.75 

$12.60 

$12.50 

$12.60 

$12.40 

$12.00 

$12.20 

$12.80 

$13.10 

Wilton  Rug,  9  X  12 

45.00 

45.25 

45.50 

44.75 

45.10 

45.40 

46.00 

44.50 

45.50 

45.00 

44.75 

45.25 

Ingrain,  yd. 

.87 

.86 

.88 

.85 

.84 

.90 

.91 

.87 

.83 

.88 

.92 

.88 

Tapestry  Brussels,  yd. 

1.02 

1.01 

.97 

1.00 

.99 

.98 

1.03 

1.04 

1.03 

1.05 

1.02 

.97 

Axminster  Rugs,  9  x  12 

22.50 

22.55 

22.00 

22.25 

22.40 

22.50 

22.40 

22.60 

23.00 

22.80 

22.20 

21.90 

Wilton  Rug,  6x9 

29.50 

29.25 

29.00 

29.75 

29.40 

29.10 

28.50 

30.00 

29.00 

29.50 

29.75 

29.25 

Velvet,  yd. 

1.47 

1.48 

1.46 

1.49 

1.50 

1.44 

1.43 

1.47 

1.51 

1.46 

1.42 

1.46 

Body  Brussels,  yd. 

1.65 

1.70 

1.95 

1.55 

1.40 

1.63 

1.65 

1.43 

1.44 

1.65 

1.95 

1.63 

Axminster,  yd. 

1.80 

1.81 

1.85 

1.82 

1.83 

1.84 

1.79 

1.78 

1.79 

1.77 

1.80 

1.85 

Wilton,  yd. 

4.50 

4.45 

4.20 

4.60 

4.75 

4.52 

4.50 

4.72 

4.71 

4.50 

4.20 

4.52 

Tiining 

.14 

.13 

.16 

.15 

.17 

.14 

.18 

.15 

.13 

.17 

.18 

.14 

SELLING   PRICE   LIST   FOR   NOVEMBER 

AND   ] 

DECEMBER 

(Conti 

nued) 

13 

14         15 

16 

17 

18 

19 

20         21 

22 

23 

24 

Axminster  Rugs,  6x9 

$12.90 

$12.10  $12.50 

$12.60 

$12.80 

$12.60 

$12.30 

$12.40 

$12.20|$12.50 

$12.40 

$12.30 

Wilton  Rug,  9  X  12 

46.00 

44.50 

44.75 

45.50 

45.00 

45.40 

46.00 

45.25 

44.50 

45.10 

45.00 

44.50 

Ingrain,  yd. 

.85 

.87 

.90 

.83 

.92 

.84 

.88 

.92 

.87 

.91 

.88 

.90 

Tapestry  Brussels,  yd. 

.99 

1.03 

1.02 

1.00 

1.07 

1.04 

1.05 

.99 

1.00 

1.02 

1.01 

1.05 

Axminster  Rugs,  9  x  12 

22.10 

22.90 

22.50 

22.40 

22.20 

22.40 

22.70 

22.60 

22.80 

22.50 

22.60 

22.70 

Wilton  Rug,  6x9 

28.50 

30.00 

29.75 

29.00 

29.50 

29.10 

28.50 

29.25 

30.00 

29.40 

29.50 

30.00 

Velvet,  yd. 

1.49 

1.47 

1.44 

1.51 

1.42 

1.50 

1.46 

1.42 

1.47 

1.43 

1.46 

1.44 

Body  Brussels,  yd. 

1.65 

1.55 

1.40 

1.70 

1.44 

1.95 

1.55 

1.95 

1.70 

1.63 

1.43 

1.55 

Axminster,  yd. 

1.83 

1.79 

1.80 

1.82 

1.75 

1.78 

1.77 

1.83 

1.82 

1.80 

1.81 

1.77 

Wilton,  yd. 

4.50 

4.60 

4.75 

4.45 

4.71 

4.20 

4.60 

4.20 

4.45 

4.52 

4.72 

4.60 

Lining 

.12 

.19 

.18 

.14 

.17 

.16 

.15 

.13 

.14 

.17 

.18 

.19 

SELLING   PRICE   LIST   FOR   NOVEMBER  AND    DECEMBER    (Continued) 


25 

26 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

Axminster  Rugs,  6x9 

$12.70 

$12.20 

$12.60 

$12.70 

$12.50 

$12.45 

$12.80 

$12.00 

$13.00 

$13.10 

$12.30  $12.90 

Wilton  Rug,  9  X  12 

45.40 

45.40 

46.00 

45.25 

45.50 

44.50 

45.10 

44.75 

45.00 

45.10 

46.00 

44.50 

Ingrain,  yd. 

.84 

.88 

.92 

.90 

.87 

.91 

.84 

.85 

.83 

.90 

.87 

.92 

Tapestry  Brussels,  yd. 

1.02 

1.00 

1.05 

1.00 

1.02 

.97 

1.04 

1.03 

.99 

.98 

1.01 

1.02 

Axminster  Rugs,  9  x  12 

22.30 

22.80 

22.40 

22.30 

22.50 

22.55 

22.20 

23.00 

22.00 

21.90 

22.70 

22.10 

Wilton  Rug,  6x9 

29.10 

29.10 

28.50 

29.25 

29.00 

30.00 

29.40 

29.75 

29.50 

29.40 

28.50 

30.00 

Velvet,  yd. 

1.50 

1.46 

1.42 

1.44 

1.47 

1.43 

1.50 

1.49 

1.51 

1.44 

1.47 

1.42 

Body  Brussels,  yd. 

1.65 

1.40 

1.55 

1.70 

1.65 

1.95 

1.44 

1.63 

1.43 

1.65 

1.95 

1.40 

Axminster,  yd. 

1.80 

1.82 

1.77 

1.82 

1.80 

1.85 

1.78 

1.79 

1.83 

1.84 

1.81 

1.80 

Wilton,  yd. 

4.50 

4.75 

4.60 

4.45 

4.50 

4.20 

4.71 

4.52 

4.72 

4.50 

4.20 

4.75 

Lining 

.15 

.12 

.18 

.15 

.19 

.14 

.17 

.19 

.16 

.14 

.12 

.18 

204  BOOKKEEPING  FOR   MODERN  BUSINESS 

DRAFTS   AND    TRADE   ACCEPTANCES 

When  merchants  sell  merchandise  on  account,  payment  is  usually  made  by  check.  Some- 
times customers  fail  to  pay  for  the  merchandise  according  to  the  terms  of  the  sale.  Then 
their  attention  is  called  to  their  past-due  accounts  bj^  telephone  or  by  a  personal  letter. 

Suppose  C.  J.  Clark  of  New  York  City,  to  whom  J.  T.  Brown  of  Philadelphia  had  sold 
merchandise  amounting  to  $250.00,  failed  to  pay  his  account  when  due.  ]\Ir.  Brown  would 
write  a  letter  calling  Mr,  Clark's  attention  to  the  overdue  account  requesting  him  to  pay 
the  S250.00.  Assume  that  Mr.  Clark  failed  to  pay  the  amount  due  and  continued  to  ignore 
Mr.  Brown's  letters  requesting  payment.     What  procedure  would  follow? 

Business  men  have  found  that  a  customer  will  not  be  likely  to  refuse  pa3'ment  of  a  past- 
due  account  when  the  request  is  made  through  a  bank,  in  order  to  preserve  their  financial 
standing.  The  following  letter,  therefore,  might  be  written  by  Mr.  Brown  and  delivered  to  the 
Second  National  Bank  requesting  payment  by  Mr.  Clark. 

Philadelphia,  Pa.,  April  3,  19- 
Mr.  C.  J.  Clark, 
658  Wall  Street, 
New  York,  N.  Y. 
Dear  Sir: 

Please  pay  two  hundred  fifty  ($250.00)  dollars  to  the 
Second  National  Bank  when  this  written  request  is  presented  to  you. 
This  is  the  amount  with  which  I  have  you  charged  on  our  books. 
Charge  my  account  when  you  have  paid  the  Second  National  Bank  this 
amount. 

Yours  very  truly, 
JTB/GH  (J.  T.  Brown) 

If  the  form  of  such  a  letter  or  request  were  changed  somewhat  and  the  negotiable  words 
or  order  or  or  bearer  added,  it  becomes  a  commercial  negotiable  paper  called  a  draft,  as  shown 
in  the  following  illustration: 

Sight  Draft  (for  Collection) 

Illustration  185 


$2.JJ2Jf^ PHILADELPHIA.  PA.      /C^C^^^   .9        \  9  -_ 


Tin:  ORDER  Of 


P.VV  TO 


WITH   eXCHANOE 


r- 


N.M.LiE  RECKrSTSD  AND  CH^VRGK  THE  S.\M  li  TO  ACCOl  .N  T  OI^ 

TO (^.{/.(^y^^y )  n   /3/p 


z^ 


DRAFTS  AND   TRADE  ACCEPTANCES 


205 


The  foregoing  draft  is  simply  a  moro  formal  request  than  the  letter  asking  C.  J.  Clark 
to  pay  the  Second  National  Bank,  or  anyone  to  whom  the  Second  National  Bank  endorses 
the  draft,  S250.00  which  he  owes  Mr.  Brown. 

A  draft  is  a  written  request  drawn  by  one  party  directing  a  second  party  to  pay  a  certain 
sum  of  money  to  the  order  of  a  third  party. 

Parties  to  a  Draft.— The  three  names  mentioned  in  Illustration  185  are  known  as  the 
parties  to  the  draft.  J.  T.  Brown,  who  makes  the  request,  is  called  the  draiver.  C.  J.  Clark, 
to  whom  the  request  is  made,  is  called  the  draivee.  The  Second  National  Bank,  which  presents 
the  written  request,  is  called  the  payee.     Thus: 

The  drawee  is  the  one  who  owes  the  money,  and  on  whom  the  draft  is  drawn. 

The  drawer  is  the  one  to  whom  the  money  is  owed,  and  who  writes  or  draws  the  draft. 

The  payee  is  the  one  to  whom  the  draft  is  made  payable. 

Kinds  of  Drafts.— If  the  written  request  directs  the  drawee  to  pay  money  at  sight  (the 
time  of  presentation  of  the  draft)  it  is  called  a  sight  draft.  If  the  written  request  dii'ects  the 
money  to  be  paid  at  some  time  in  the  future,  it  may  be  a  time  draft  or  a  time  sight  draft. 

Use  of  Drafts.— A  draft  is  drawn,  to  make  collections,  or  to  transfer  credit. 

In  the  sight  draft  illustrated  in  No.  185,  Mr.  Brown  requested  Mr.  Clark  to  pay  $250.00 
to  the  Second  National  Bank  instead  of  paying  the  money  to  him.  It  is  the  same  as  if  the 
money  had  been  paid  to  Mr.  Brown  and  deposited  by  him  in  the  Second  National  Bank. 
His  bank  account  has  been  increased  by  this  amount. 

The  following  illustrates  the  form  of  the  entry  which  Mr.  Brown  would  make  on  the  cash 
receipts  side  of  his  cashbook,  debiting  the  Cash  account  and  crediting  C.  J.  Clark's  account. 

Illustration  186 

J.  T.  Brown's  (The  Drawer)  Cashbook  Entry : 

Cash  Receipts 


C^-^i^ 


J 


GGCLil^ 


■^.^■i-iX^i^ 


2SO  ao 


In  actual  business  it  is  not  customary  for  the  drawer  of  a  draft  to  make  an  entry  in  his 
books  crediting  the  drawee's  account  until  the  money  is  received,  or  as  in  the  above  case, 
until  collected  and  the  amount  placed  to  the  drawer's  credit  in  the  bank.  In  this  and  the 
following  exercises  it  will  be  assumed  that  the  parties  will  pay  the  drafts  when  presented,  in 
order  that  the  entries  may  be  made  and  fully  explained  at  the  time  the  exercises  are  given. 

Terms  of  Expression.— When  a  sight  draft  is  paid  by  the  drawee  it  is  said  to  be  honored; 
if  the  drawee  refuses  to  pay  the  draft  when  it  is  presented  to  hun  it  is  said  to  be  dishonored. 

Drafts  Drawn  to  Transfer  Credit.- Another  form  of  a  draft  less  frequently  used  in  business 
to-day  may  be  drawn  to  transfer  credit.  Suppose  J.  T.  Brown  had  purchased  merchandise 
valued  at  $250.00  from  William  Miller  of  New  York  City.  Instead  of  drawing  a  draft  in 
favor  of  the  Second  National  Bank,  Illustration  185,  Mr.  Brown  could  have  substituted 
William  Miller's  name.  Since  both  Mr.  Clark's  and  Mr.  Miller's  places  of  business  are  in 
New  York  City,  Mr.  Clark  could  pay  the  money  directly  to  Mr.  Miller;  thus  Mr.  Clark 
would  cancel  his  indebtedness  to  Mr.  Brown  and  Mr.  Brown  would  cancel  his  indebtedness  to 


206 


BOOKKEEPING  FOR   MODERN  BUSINESS 


Mr.  ]\Iiller.  This  method  of  settling  indebtedness  constitutes  a  convenient  way  when  the 
drawee's  and  payee's  places  of  business  are  in  the  same  town  or  city.  It  relieves  the  drawee 
from  sending  money  to  the  drawer  which  can  more  easily  l^e  paid  directly  to  the  payee. 

Illustration  187  is  a  sight  draft  drawn  by  J.  T.  Brown  (drawer)  on  C.  J.  Clark  (drawee) 
in  fa\'or  of  William  Miller  (payee). 


Sight  Draft  (Transfer  Credit) 


Illustration  187 


S-^:..^^- 


/^ 


PHILADELPHIA,  PA.     /^^^^^A^^Jy^  .  ?  IH  - 
PAV  TO 


TirE  ORDE 


.  /..■'i^i^-ty .^A^£yC-)^L't::?>±^  ^^^' 


WITH   EXCHANGE 


DOLLARS 


^ALL•E  RECEI\T3D  AMD  CILVItGL:  TIIL:  S.VME    TO  ACCOUNT  OF 


lO. 


0(7rA.J. 


NO. 


C/  ^Q^^ 


■^V^y'-l^-y 


J.  T.  Brown's  (The  Drawer)  Journal  Entry. — The  following  illustrates  the  entry  which 
J.  T.  Brown  would  make  debiting  William  Miller's  account  and  crediting  C.  J.  Clark's 
account. 


Illustration  188 


-2J-^ 


£>£> 


2SO 


In  Illustration  188  J.  T.  Brown  debited  William  Miller's  account  to  show  that  he  paid  him 
S2o0.00  (through  C.  J.  Clark),  and  he  credited  C.  J.  Clark's  account  to  show  that  C.  J.  Clark 
canceled  his  ind(0)tedness  to  him.     Th(>  money  did  not  pass  through  the  hands  of  Mr.  Brown. 

C.  J.  Clark's  (The  Drawee)  Cashbook  Entry. — The  following  illustrates  the  form  of 
entry  which  C.  J.  Clark  would  make  on  the  cash  payments  side  of  his  cashbook,  debiting 
J.  T.  Brown's  account  and  crediting  the  Cash  account. 


Cash  Payments 


Illustration  189 


{i!!^Ut:/- 


^■'y-  /C^^^<?«*^iZ' 


''Vt<Z't'C^..<i^^<AA^-<:^-aJ^ 


2SC  O0 


Since  William  Miller  received  the  money  from  C.  J.  Clark  at  the  written  request  of 
J.  T.  Brown,  William  Miller's  name  is  not  recorded  on  C.  J.  Clark's  books. 


DRAFTS  AND   TRADE  ACCEPTANCES 


207 


Mr.  Miller's  (The  Payee)  Cashbook  Entry. — The  following  illustrates  the  form  of  an 
entry  which  William  Miller  would  make  on  the  cash  receipts  side  of  his  cashbook,  debiting 
the  Cash  account  and  crediting  J.  T.  Brown's  account. 


Illustration  190 


y^^^A=lJ^^i>--yz^9^>Jrp'f'Z^ 


Cash  Receipts 


^'t'-yz^t^^ 


J  J/  /S 


JtiJ 


7^ 


William  Miller  received  the  money  from  C.  J.  Clark  at  the  written  request  of  J.  T.  Brown. 
Since  C.  J.  Clark  was  not  indebted  to  William  Miller  but  paid  him  at  the  request  of  J.  T. 
Brown,  C.  J.  Clark's  name  is  not  recorded  on  William  Miller's  books. 


Time  Draft  (Three  Parties) 


Illustration  191 


%2.^0 


PHILADELPHIA,  PA.. 


li.19 


I'AV  TO 


?»yM^^ 


DOLLARS 


EXCHANGE 


\  ALUE  RECEIMED  ^\ND  CHARGE  THE  S.'OIE  TO  ACCOUNT  OF 


Time  Drafts.— The  draft  illustrated  in  No.  191  is  the  same  as  the  draft  illustrated  in  No. 
187  with  the  exception  that  it  is  to  be  paid  by  the  drawee,  C.  J.  Clark,  thirty  days  after  April  3d 
or  on  May  3d;  therefore  it  is  called  a  time  draft. 

The  drawer's  entry  is  the  same  for  the  above  tune  draft  as  it  was  for  the  three-party  sight 
draft  illustrated  in  No.  188. 

The  time  draft  is  taken  by  William  Miller,  the  payee,  to  C.  J.  Clark,  the  drawee,  who 
either  honors  or  dishonors  it.  To  honor  a  time  draft  is  to  agree  to  pay  it  at  maturity,  the  day 
it  is  due.  This  agreement  should  be  in  writing  and  signed  by  C.  J.  Clark  (drawee).  Writing 
the  word  accepted  across  the  face  of  the  draft  and  signing  it  constitutes  an  agreement  to  pay 
the  amount  of  the  draft  when  due.    This  agreement  is  called  accepting  the  draft. 

When  the  time  draft.  Illustration  191,  has  been  accepted  by  C.  J.  Clark,  the  drawee,  it 
becomes  his  written  promise  to  pay.  This,  as  you  have  learned  in  previous  work,  is  called  a 
Notes  Payable.  The  accepted  draft  will  be  held  by  William  Miller,  the  payee,  until  the  day 
of  maturity  when  it  will  be  presented  by  him  to  C.  J.  Clark,  the  drawee,  for  payment. 

C.  J.  Clark  should  debit  J.  T.  Brown's  account  and  credit  the  Notes  Payable  account. 
His  entry  should  be  made  in  the  notes  payable  book. 


208  BOOKKEEPIXC;   FOR   MODERN  BUSINESS 

Accepted  Time  Draft 
Illustration  192 


$2^^^^ 


PHILADELPHIA,  PA. 


^, 19^ 


PAV  TO 


DOLLARS 


_fl^ 


6^(2-r^y-^y 


The  Notes  Payable  account  should  include  both  promissory  notes  and  accepted  drafts. 
William  Miller  should  debit  the  Notes  Receivable  account  and  credit  J.T.Brown's  account. 
His  entry  should  be  made  in  the  notes  receivable  book. 

Time  Sight  Draft  fThree  Parties) 


Illustration  193 


%^.^n 


J^ 19 


p.  W  TO 


DOLLARS 


\'.VLUE  RKCEINTSn  AND  CHARGE  T 


aaa^AA 


N 


o. y/.      ^. s/r')^M^£!^?7^^.^'U^J^  TZ'U 


.  /  /h>i^r7i'^./->i:y 


The  time  draft  illustrated  in  No.  192,  r(>ads  Thiriy  days  after  date,  whicli  means  that  it 
will  be  due  and  payable  thirty  days  after  April  3d,  even  if  not  accept i\l  until  a  (.late  later  than 
April  3d. 

The  time  sight  draft  illustrated  in  No.  193  reads  Thirty  days  after  sight,  which  means 
that  it  will  be  due  thirty  days  after  it  has  been  accepted  by  the  drawee. 

The  time  draft  illustrated  in  No.  192  is  due  on  May  3d  (thirty  days  after  the  date  of  draft). 

The  time  sight  draft  illustratofl  in  No.  103  is  due  on  May  .")th  (thirty  days  after  the  date  of 
acceptance). 

All  entries  for  the  draft  illustrated  in  No.  193  are  the  same  as  for  No.  192. 


DRAFTS  AND   TRADE  ACCEPTANCES 
Sight  Draft  (Two  Parties) 


209 


Illustration  194 


$^^cZl£ 


PKULADELPHIA.  PA. 


/^^^^^•;/ 


.19 


PW  Ti) 


THE  ORDER  OF 


TH    EXCHANGE 


DOLLARS 


\ALUE  RKCEIVED  .WD  CHi^J^GE  THE  S.VME  TO  ACCOUNT  OF 


V.  /  A>^..^9-/^y-pi'^ 


The  draft  illustrated  in  No.  194  is  used  extensively  in  business  for  the  purpose  of  collecting 
accounts  that  are  due  or  past  due.  The  draft  is  made  payable  to  the  order  of  the  drawer  or  his 
agent  and  is  usually  left  at  a  bank  for  collection. 

In  a  two-party  draft  the  payee  is  the  drawer  or  his  agent. 

J.  T.  Brown's  (Payee  and  Drawer)  Entry: 

Illustration  195 


J 


QG.(2La^ 


iso':  e>e> 


Mr.  Clark's  entry  for  Illustration  194  would  be  the  same  as  in  Illustration  189. 

Accepted  Time  Draft    (Two  Parties) 


Illustration  196 


^  J^.5-^^ 


THE  ORDER  OF 


d^^sz^ 


PAV  TO 


OLI^AJRS 


N-O.^ZZ' 


r^y'-^y 


210  BOOKKEEPING  FOR  MODERN  BUSINESS 

In  Illustration  196  the  drawer,  J.  T.  Brown,  would  make  an  entry  in  his  notes  receivable 
book  debiting  the  Xotes  Receivable  account  and  crediting  C.  J.  Clark's  account. 

C.  J.  Clark  would  make  an  entry  in  his  notes  payable  book  debiting  J.  T.  Brown's  account 
and  crediting  the  Notes  Payable  account. 

Observations : 

The  Drawer's  Entries 
A  Three-Party  Draft. 

The  drawer  credits  the  drawee's  account. 

The  drawer  debits  the  paj^ee's  account  unless  the  payee  is  an  agent  to  collect  the  money, 
when  the  entry  would  be  the  same  as  for  a  two-party  draft. 

The  Drawee's  Entries 
The  drawee  always  debits  the  drawer's  account. 
The  drawee  credits  the  Cash  account  if  it  is  a  sight  draft. 
The  drawee  credits  the  Notes  Payable  account  if  it  is  a  time  draft  or  a  time  sight  draft. 

The  Payee's  Entries 
The  payee  always  credits  the  drawer's  account. 
The  payee  debits  the  Cash  account  if  it  is  a  sight  draft. 

The  payee  debits  the  Notes  Receivable  account  if  it  is  a  time  draft  or  a  time  sight  draft. 
A  Two-Party  Draft. — In  a  two-party  draft  the  drawer  and  payee  are  the  same  person. 

The  Drawer  and  Payee's  Entries 
As  payee,  he  would  debit  the  Cash  account  if  a  sight  draft,  or  debit  the  Notes  Receivable 
account  if  a  time  draft  or  a  time  sight  draft. 

As  drawer  he  would  credit  the  drawee's  account. 

The  Drawee's  Entries 
The  drawee's  entrj^  is  the  same  in  a  two-party  draft  as  it  is  in  a  three-partj'  draft. 

A  notice  of  protest  is  a  formal  act  of  a  Notary  Public,  declaring  certain  paper  dishonored 
by  the  payer,  and  holding  the  person  who  previously  held  title  to  the  paper  liable  to  the 
holder. 

The  law  requires  that  each  person  secondarily  liable  for  the  payment  of  any  commercial 
paper,  shall  be  notified  in  case  of  dishonor.  However,  the  holder  can  waive  or  set  aside  this 
requirement  by  using  the  No  Protest  notice  shown  on  the  left-end  of  Illustration  No.  193. 

Questions  in  Review:  Do  not,  under  any  consideration,  attempt  to  proceed  further  in  the 
work  until  you  can  answer  the  following  questions. 

1.  What  is  a  draft?  2.  What  names  are  given  to  the  parties  to  a  draft?  3.  What  is  a 
sight  draft?  4.  What  is  a  time  draft?  5.  What  is  a  time  sight  draft?  G.  What  entry  does 
the  drawer  always  make  when  a  three  party  draft  is  drawn?  7.  What  party  does  the  drawee 
always  debit?  8.  What  party  does  the  payee  always  credit  when  a  three  party  draft  is 
drawn?  9.  What  is  meant  by  honoring  a  draft?  10.  What  is  meant  by  accepting  a  draft? 
1 1 .  What  agreement  does  it  constitute? 


DRAFTS  AND   TRADE  ACCEPTANCES  211 

Exercises  for  the  Student 
Exercise  96 

Write  the  drafts  called  for  in  the  following  exercises,  and  make  the  journal,  cashbook, 
and  notebook  entries  for  each  party. 

May  1,  19—.  Albert  Reed  &  Co.,  Cincinnati,  Ohio,  owe  you  $450.00,  and  they  have 
agreed  to  honor  your  sight  draft  on  them  in  favor  of  H.  H.  Ervien. 

May  2,  19—.  Martin  C.  Hoover,  Pittsburgh,  Pa.,  has  drawn  a  sight  draft  on  you  for 
$500.00,  in  favor  of  the  Pittsburgh  National  Bank. 

May  3,  19—.  You  received  from  Walter  T.  Scott,  Albany,  New  York,  on  May  2d,  a 
sight  draft  drawn  on  Clifford  Moore  (your  city)  for  $240.00.  You  presented  the  draft  to 
Mr.  Moore  to-day  and  received  payment. 

May  5,  19—.  You  owe  Walter  C.  Cannon,  Lima,  Ohio,  $200.00,  and  H.  S.  Lehr  of  the 
same  town  owes  you  a  like  amount.     Draw  a  sight  draft  that  will  settle  the  two  accounts. 

May  6,  19 — .  J.  C.  King,  Boston,  Mass.,  drew  a  10-day  time  draft  in  your  favor  on 
John  C.  Peiffer  of  your  city  for  $350.00.  You  presented  the  draft  to  Mr.  Peiffer,  and  he 
accepted  it.    Write  the  acceptance  for  Mr.  Peiffer. 

May  8,  19 — .  You  have  to-day  accepted  a  10-day  sight  draft  for  $230.00,  drawn  by 
Oliver  Mason,  Chicago,  111.,  in  favor  of  George  W.  Long  (your  city). 

May  10,  19—.  Draw  a  30-day  time  draft  on  Charles  Murry,  Philadelphia,  Pa.,  for 
$260.00,  in  favor  of  yourself.    Accept  the  draft  for  Mr.  Murray. 

May  12,  19—.  You  owe  Byron  T.  Smith  $400.00  on  account,  and  you  give  him  in  pay- 
ment a  sight  draft  drawn  on  Henry  Mason,  Ada,  Ohio,  for  this  amount. 

May  16,  19 — .  You  have  on  hand  the  acceptance  received  from  John  C.  Peiffer  on  the 
6th,  which  is  due.     Present  it  to  Mr.  Peiffer  for  payment. 

May  18,  19 — .  George  W.  Long  of  your  city  presented  your  acceptance  of  the  8th  for 
payment.     You  have  written  a  check  to  pay  it. 

May  20,  19—.  Draw  a  10-day  draft  on  W.  D.  Ferris,  Akron,  Ohio,  for  $120.00,  in 
favor  of  J.  L.  Plummer.     Accept  the  draft  for  W.  D.  Ferris. 

Suppose  Thomas  B.  Miller  &  Co.,  Philadelphia,  Pa.,  wish  to  buy  merchandise  from 
Brown  &  WTiite,  Albany,  New  York,  amounting  to  $550.00.  If  their  financial  standing  is 
unknown  to  Brown  &  White,  they  should  not  send  their  own  check,  but  should  buy  a  bank 
draft  from  the  bank  in  which  they  keep  their  deposit  and  send  it  to  them  instead.  Brown  & 
White  will  accept  the  draft  in  payment  and  ship  the  merchandise  at  once.  Banks  have,  as 
agents,  other  banks,  called  correspondents,  in  financial  centers,  with  whom  they  carry  de- 
posits.    It  is  against  these  deposits  that  orders  or  drafts  are  drawn. 

A  bank  draft  may  be  made  payable  to  the  order  of  the  person  or  firm  to  whom  it  is  to  be 
sent,  or  to  the  order  of  the  purchaser.  The  better  plan  is  to  have  the  draft  made  payable  to 
the  order  of  the  purchaser,  who  will,  in  turn,  endorse  it  to  the  person  or  firm  from  whom  the 
goods  were  purchased.  The  endorsement  will  enable  the  draft  to  be  identified  if  it  should 
become  separated  from  the  instructions  relating  to  it. 

The  following  form  illustrates  how  Thomas  B.  ISIiller  &  Co.,  should  draw  their  check 
in  order  to  buy  a  bank  draft  from  the  Second  National  Bank. 


212 

Illustration  197 


BOOKKEEPING  FOR  MODERN   BUSINESS 


Philadelphia,  Pa., 


^  4<.       19, 


Pay  to  the  order  of 


SECOND  NATIONAL  BANK      3-6i 


Some  banks  charge  a  small  fee  for  the  draft,  while  others  do  not  charge  regular  customers. 
The  above  check  is  drawn  for  50c  more  than  the  face  of  the  draft,  and  this  charge  is  called 
Exchange.  When  Thomas  B.  Miller  &  Co.  send  tlicir  check  to  the  Second  National  Bank, 
the  cashier  will  issue  a  bank  draft  to  their  order  similar  to  the  following  form : 


Bank  Draft 


Illustration  198 


No.  1987 


Philadelphia,  Pa., 


2  4<    19^ 


Pay  to  the  order  of 


SECOND  NATIONAL  BANK      3-6i 


Dollars 


To  National  City  Bank 

New  York,  N.  Y» 


A  hank  draft  is  an  order  drawn  by  the  cashier  of  one  bank  upon  a  l)ank  in  another  city 
or  town.  A  bank  diaft  does  not  differ  from  an  ordinary  sight  draft  except  that  it  is  drawn 
by  one  bank  on  another,  and  is  made  payable  to  the  order  of  a  thirtl  party.  The  bank  draft 
is  a  convenient  and  safe  way  of  making  remittances  of  money.  The  draft  is  usually  drawn 
in  favor  of  the  purchaser,  who  endorses  it  to  the  person  or  firm  to  whom  it  is  to  ])e  sent. 

As  Thomas  B.  Miller  &  Co.  have  had  the  draft  made  payable  to  their  order,  they  should 
endorse  the  draft  before  mailing  it  to  Brown  tt  White  as  shown  in  Illustration  199. 


DRAFTS  AND   TRADE  ACCEPTANCES 


213 


A  Full  Indorsement 

The  entry  for  a  bank  draft      "'"^tration  199 
is  the  same  as  for  a  check. 

Trade  Acceptance.  —  A 
trade  acceptance  is  an  uncon- 
ditional written  order  ad- 
dressed by  the  seller  to  the 
purchaser,  signed  by  the  person 
drawing  it,  asking  the  person 
to  whom  it  is  addressed  to 
pay  at  a  stated  time  in  the 
future  a  certain  sum  in  money 
to  the  order  of  a  specified 
person, 

A  trade  acceptance  is 
somewhat  similar  in  form  to 
the  ordinary  accepted  draft,  yet 
differs  from  it  in  character  and 
circumstances  under  which  the 
trade  acceptance  is  drawn. 

A  trade  acceptance  must  arise  out  of  an  actual  commercial  transaction.     It  must  comply 
with  most  of  the  requirements  of  negotiable  paper.     It  must  possess  a  definite  maturity.     It 


BANK 

C/^^^  ^/^^TO  ~~ —  Dollars 

X,,^^ 

/yr  (l^te^v!?-z-.,&^^^-2^:-- 

\^ 

Cashier/Z 

Trade  Acceptance 


Illustration  200 


Philadelphia,  Pa., 


ON. 


July  1, 


Megrl  1,: 


TIT 


"FT 


Two  hundred  OOf^lOO 


o 


"517 
-£^^S ^ 


J'Af 


:Q>TOR  h|reob  awsbs 


:e  order  of  ourselves 

OLLARS  ($^00_00/lOO_) 

vixv^^,   ^^    XX       r.^^       »-^>.  ^ - --    -'F  THE    PURCHASE  OF  GOODS  FROM 

THE  DRAWER.      '  THE  DRAwS  wTAY^AiCCEPT  THIS  BIL^  AT    ANY  BANK,    BANKER.    OR  TRUST 


No. 


28 


THE  OBLIGATION  OF  TI§  ACC 
xxxx^  DRAWER.        THE  DRAWM  MAY  AiCCEPT  THIS  BILL   PAYA^l^ 
COMPANY  IN   THE  UNITED   S-^ES  JJiPCft  HE   M*Y  D^Sl^NATE.N^ 

O       O 


TO. 


Robinson  &  Daley  ^ 


1106  State  St. 


PQ 


Chicago, 


Sll^ 


ir 


T.  C.  Martin  &  Co 


>5 

OQ 


^y     J^T^ziayiJ^^ 


must  be  an  unconditional  promise  to  pay  at  maturity.  It  must  be  signed  by  the  party  who 
has  made  the  purchase.  All  of  the  above  requirements  tend  toward  making  the  paper  self- 
liquidating. 


214  BOOKKEEPING  FOR  MODERN  BUSINESS 

The  Use  of  the  Trade  Acceptance. — When  a  person  sells  merchandise  to  another,  he  may 
send  witli  the  bill  a  trade  acceptance  which  the  buyer  will  accept  and  return.  The  person 
selling  the  merchandise  may  take  the  trade  acceptance  to  his  bank,  discount  it  and  reinvest 
the  money  at  once.  When  merchandise  is  sold  on  account,  the  money  is  not  immediately 
available  for  reinvestment.  Credit  given  under  the  open  account  system  is  always  for  an 
indefinite  period  of  time.     The  trade  acceptance  has  a  definite,  specified  period. 

The  trade  acceptance  is  given  at  the  time  the  transaction  is  made,  and  carries  with  it  no 
imputation  of  inability  to  pay.  The  trade  acceptance  has  been  almost  the  only  commercial 
credit  paper  used  in  continental  Europe  for  several  years. 

The  principal  thought  behind  the  trade  acceptance  is  to  make  the  financing  of  real  trans- 
actions easier  for  all  concerned — to  make  it  easier  to  trade  by  making  the  credit  of  the 
countr}'  more  mobile. 

Method  of  Accounting  Trade  Acceptances.- -When  the  buyer  accepts  a  trade  acceptance, 
he  has  placed  himself  in  the  same  position  as  the  acceptor  of  a  draft. 

It  has  the  same  relation  to  the  buyer  as  a  notes  payable  and  to  the  seller  as  a  notes 
receivable  and  is  entered  as  such.  Some  firms,  where  the  number  of  trade  acceptances  is 
large,  prefer  to  open  accounts  with  Trade  Acceptances  Receivable  and  Trade  Acceptances  Pay- 
able. It  is  also  desirable  in  some  instances  to  show  the  value  of  each  sale  in  the  customer's 
account  and  credit  his  account  from  the  Notes  Receivable  book. 

The  latter  method  has  been  used  in  this  text. 


WHOLESALE  CARPET  AND   RUG  BUSINESS  215 

THE   WHOLESALE    CARPET   AND    RUG   BUSINESS 
Thomas  B.  Miller  &  Co. 

Preliminary  Explanations.— The  object  of  this  set  is  to  continue  the  work  of  November 
under  a  contract  of  partnership  between  Thomas  B.  Miller  and  the  student. 

Partnership. — A  partnership  is  a  relation  created  by  contract  made  between  two  or  more 
persons  to  combine  their  property,  effects,  labor,  or  skill  in  a  lawful  business  and  to  divide 
the  profit  or  loss  between  them. 

The  contract  of  partnership  may  be  verbal  or  in  writing. 

Articles  of  Copartnership  is  a  written  contract  which  sets  forth  the  legal  relation  of  the 
parties  interested.  The  essential  parts  of  any  written  Articles  of  Copartnership  are  given 
below : 

1.  Name  of  the  firm.  2.  Purpose  and  nature  of  the  business.  3.  Place  of  business. 
4.  Date  of  commencement  and  duration  of  partnership.  5.  Amount  of  capital.  6.  Activities 
of  partners.  7.  Length  of  fiscal  period,  etc.  8.  Distribution  of  profit  9.  Salaries  to  be  paid 
to  each  partner.     10.  Provision  for  dissolution. 

Additional  provisions  may  be  added  to  fit  the  peculiarities  of  the  business. 
Thomas  B.  Miller  and  the  student  have  agreed  to  form  a  partnership,  and  to  continue 
the  carpet  and  rug  business  located  at  487  State  Street,  Philadelphia,  Pa.     The  student  is  to 
invest  in  cash  a  sum  equal  to  Mr.  Miller's  present  worth  at  the  close  of  the  business  on  Novem- 
ber 30th  as  shown  by  the  Balance  Sheet. 

Remove  the  Articles  of  Copartnership  from  the  pad  of  Incoming  Vouchers,  sign  it  and  have 
your  instructor  sign  it  for  Mr.  Miller.    Brief  and  file  the  agreement. 

No.  59.— December  1.  The  name  of  the  firm  is  to  be  Thomas  B.  Miller  &  Co.  Take 
the  Morris  Furniture  Co's.  note  from  the  Notes  Receivable  file  and  endorse  it  as  follows:  Pa^/ 
to  the  order  of  Thomas  B.  Miller  &  Co.,  Thomas  B.  Miller. 

Write  a  check  in  favor  of  Thomas  B.  Miller  &  Co.  for  the  amount  of  Thomas  B.  Miller's 
bank  balance  as  shown  by  the  stub  of  the  check  book.  No  entries  are  necessary.  The  object 
is  to  transfer  the  right  of  property  to  the  new  firm.  A  bill  of  sale  is  a  written  statement  which 
clearly  expresses  a  transfer  of  interest  in  property. 

Make  your  investment  in  the  business  by  filling  out  the  blank  check  found  on  the  pad  of 
Incoming  Vouchers.  The  check  should  be  drawn  for  the  same  amount  as  Thomas  B.  Miller's 
present  worth  at  the  close  of  November. 

Draw  a  red  line  in  the  cashbook  beneath  the  balance  of  cash.  This  is  done  in  order  that  it 
will  not  be  posted  a  second  time  to  the  ledger  account.  Future  postings  to  the  cash  account 
in  the  ledger  must  be  only  for  the  new  receipts  and  payments  of  cash. 

Make  an  entry  for  your  cash  investment  in  the  cashbook  immediately  below  the  balance 
for  November.  Prepare  a  brief  memorandum  in  the  journal  of  the  conditions  under  which 
the  copartnership  was  formed. 

Deposit  your  check  and  the  one  signed  by  Thomas  B.  Miller  in  the  Second  National  Bank. 
Endorse  the  checks  in  the  name  of  the  firm. 

No,  50. — December  1.  It  has  been  decided  to  purchase  the  store  and  lot  at  487  State 
St.,  in  which  the  business  is  now  located,  from  the  Philadelphia  Real  Estate  Co.,  for  $7,000.00, 


216  BOOKKEEPING  FOR   MODERN  BUSINESS 

value  of  lot  81,000.00.  The  deed  has  been  sent  to  the  Recorder  of  Deeds  for  record  and 
transfer  of  title. 

A  deed  is  any  authority  or  contract  in  writing,  signed,  sealed,  and  delivered,  that  purports 
to  convey  the  title  to  lands  from  one  person  to  another. 

Write  a  check  in  favor  of  the  Philadelphia  Real  Estate  Co.  for  $7,000.00.  Sign  the  check 
as  shown  in  the  following  illustration. 

Illustration  201 


No._^^ _  Philadelphia,  Pa.,  ^-^yLk^^  / 19- 

SECOND  NATIONAL  BANK      3-6i 


Pay  to  the  order 
><L,^^^^^.y7^^,./^_,^f:^^^yt^^,.^^^  .^^^    ~ — ^^ ^ .._ _ Dollars 

Per  j^<£^^.^.<f^>:^^      


No.  61. — December  1.  We  have  had  the  building  insured  for  84,000.00  in  the  ^Mercantile 
Y'lXKi  Insurance  Co.  at  a  yearly  premium  of  $60.00,  and  our  stock  of  goods  insured  for  82,000.00 
in  the  same  company  at  the  monthly  premium  rate  of  32^  per  hundred. 

Write  a  check  in  favor  of  the  Mercantile  Fire  Insurance  Co.  for  $66.40,  in  payment  of  the 
policies.     Charge  this  amount  to  the  Insurance  Prepaid  account. 

No.  62. — December  2.     Pay  this  bill  for  stationery  by  check. 

No.  63. — December  2.     Invoice  from  W.  B.  Jones  &  Sons,  terms,  2  15,  n/30. 

Stock  Record  cards  will  not  be  kept  during  the  month  of  December. 

No.  64. — December  2.  Invoice  from  the  INIason  Fm-niture  Co.,  terms,  10-day  trade 
acceptance.     Accept  it  and  make  entries  in  the  purchases  journal  and  notes  payable  book. 

No.  65.— December  2.  Draw  a  check  for  $200.00  in  favor  of  Cash.  Cash  it  and  place 
the  monc'3  in  the  cash  drawer. 

The  8200.00  in  currency  will  be  used  to  pay  small  bills  and  other  expenses  which  occur 
from  time  to  time.  No  entry  is  made  for  this  check  in  the  cashbook,  as  we  have  only  trans- 
ferred the  money  from  the  bank  to  our  cash  drawer,  and  it  is  still  in  our  possession. 

No.  66. — December  3.  Order  from  Butler  &  Carson  Co.,  accompanied  bj'  a  check  for 
8300.00  to  apply  on  account. 

No.  67. — December  3.     Order  from  John  J.  Howard  tt  Co., terms  on  account. 

No.  68. — Decenilier  3.  Write  a  telegram  of  ten  or  less  words  ord(M-ing  from  the  Mason 
Furniture  Co.  80  j^ds.  Body  Brussels;  60  yds.  Axminster.  Pay  35ff  in  currency  for  the  tele- 
gram.    Have  the  telegram  approved  by  the  instructor.     Write  a  letter  confirming  the  telegram. 

The  following  suggests  the  general  wording  and  the  form  of  a  telegram. 


WHOLESALE   CARPET  AND   RUG  BUSINESS 


217 


CLASS  OF  SERVICE   DESIRED      | 

TELEGRAM 

DAY  LETTER 

— 

NIGHT  MESSAGE 

NIGHT  LETTER 

Pctrons    should    nuik   an    X  opiio- 
tlte   Die  class    o(    senrka  dosireil: 
OTHERWISE       THE       MESSAGE 
WILL    BE    TRANSMITTCD    AS    A 
FULL-RATE    TEL£G!WM 

WESTEJ^k  UNION 

AM 


NEWCOMB  CARLTON.  PRCSIOBNT 


OEOROE  W.  E.  ATKINS.  FIRST  VICB-PRKSIDKNT 


I  OR  CHARCa 


Send  tba  following  message,  sobject  to  the  temii 
'  oa  back  hereof,  which  are  hereby  agreed  Co 

Philadelphia  Pa 
December  3  19 
To  Mason  Furniture  Co 

Boston  Mass 
Send  eighty  yards  velvet  ten  wilton  rugs  nine  by  twelve 

Thomas  B  Miller  &  Co 


A  business  house  preserves  duplicate  copies  of  all  papers  sent  out.  All  telegrams  should 
be  typewritten  if  possible.  When  this  is  impossible,  it  is  of  the  utmost  importance  that  the 
handwriting  be  legible.  If  the  message  to  be  sent  is  important,  it  is  customary  to  request  the 
receiving  operator  to  repeat  the  message  to  the  sending  operator.  Repeating  the  message 
practically  insures  its  correct  transmission.  An  additional  charge  of  one-half  the  unrepeated 
telegram  rate  is  made  for  this  service.  A  carbon  copy  of  the  telegram  with  a  letter  confirming 
the  message  should  be  mailed  immediately  after  the  message  has  been  sent.  The  letter  may 
begin  as  follows: 

"The  following  is  in  confirmation  of  our  telegram  of  this  date,"  etc. 


No.  69. — December  4. 
Pay  the  bill  by  check. 

No.  70. — December  4. 
2/10,  n/30. 

No.  71. — December  4. 

No.  72.     December  6. 
to  apply  on  account. 

No.  73. — December  6. 
sent  on  the  3d. 

No.  74. — December  6. 

No.  75. — December  7. 


Bill  from  the  Dayton  Furniture  Co.  for  one  office  desk,  $48.00. 

Fill  this  telegraphic  order  from  Walter  T.  Thompson.      Terms 

T.  J.  Jackson  &  Co.  send  their  check  for  $200.00  on  account. 
Send  a  check  to  the  J.  Barton  &  Sons'  Carpet  Co.  for  $300.00 

Invoice  from  the  Mason  Furniture  Co.  in  response  to  our  telegram 


Pay  this  freight  bill  by  check. 

Draw  a  sight  draft  on  T.  J.  Jackson  &  Co.  in  favor  of  the  Howe 
Carpet  Co.,  for  $510.00,  in  full  of  account. 

Review  the  exercises  previously  given  for  sight  drafts.  By  referring  to  the  Howe  Carpet 
Co.'s  account  in  the  ledger  it  will  be  found  that  we  owe  them  a  balance  on  their  invoice  of 
November  17th.  Since  T.  J.  Jackson  &  Co.  is  indebted  to  us,  we  have  decided  to  request 
them  to  pay  a  part  of  what  they  owe  us  to  the  Howe  Carpet  Co.  Write  a  sight  draft,  and 
enclose  it  with  a  letter  properly  addressed  to  the  Howe  Carpet  Co.  advising  them  of  the  remit- 
tance. It  is  customary  also  to  write  a  letter  to  the  drawee,  in  this  case  T.  J.  Jackson  &  Co., 
advising  them  that  you  have  drawn  on  them  in  favor  of  the  Howe  Carpet  Co.  and  requesting 
them  to  honor  the  draft  when  it  is  presented  to  them  by  the  Howe  Carpet  Co. 


218  BOOKKEEPING   FOH   MODERN  BUSINESS 

No.  76. — December  7.     Order  from  W.  C.  Mills,  Lima,  Ohio.     Draw  a  30-day  trade 
acceptance  for  the  amount  of  the  bill.     Have  j-our  instructor  accept  it  for  W.  C.  Mills. 

Forms   of  Notification   of  Drafts 


Philadelphia,  Pa. 

,  December 

7,  19- 

Rogers  &  Co. 

, 

Baltimore, 

Maryland. 

Gentlemen 

We 

have  this 

day  drawn  upon 

you  at 

sight. 

in 

favor  of 

the  Brown 

Ca 

rpet  Co.  0 

f  your  city,  for  $600. 

00.   PI 

ease  honor    | 

the  draft 

wh 

en  presented  for  payment. 

Yours  very 

truly. 

Thomas  B. 

Miller 

&  Co.         1 

Per 

Philadelphia,  Pa.,  December  7,  19- 

The  Brown  Carpet  Co., 

Baltimore,  Maryland. 

Gentlemen: 

Enclosed  find 

a  sight  draft  on  Rogers  &  Co.,  drawn  in 

your  favor,  for  $600.00, 

the  balance  due  on  your  invoice  of 

November  17. 

Yours  very  truly. 

Thomas  B.  Miller  &  Co. 

Per 

No.  77. — December  7.  Discount  at  the  bank  the  trade  acceptance  received  from  W.  C. 
Mills  in  the  above  transaction,  and  receive  credit  for  the  proceeds. 

Report  No.  7. — Prepare  a  report  and  post  all  entries  to  date. 

No.  78. — December  8.  Draw  a  sight  draft  on  Morris  Furniture  Co.,  in  favor  of  J. 
Barton  &  Sons'  Carpet  Co.,  for  the  amount  of  the  Morris  Furniture  Co.'s  indebtedness,  and 
forward  it  to  J.  Barton  &  Sons'  Carpet  Co.  to  apply'on  account. 

Draw  the  sight  draft  and  write  the  necessary  letters. 

No.  79. — December  8.  Order  from  A.  C.  Martin,  with  the  request  that  it  be  filled  at 
once  and  shipped  by  express,  C.  O.  D. 

No.  80. — December  8.  Give  the  J.  Barton  &  Sons'  Carpet  Co.  your  10-dav  note  with 
interest  at  G%  for  tiie  balance  of  the  invoice  of  November  19th. 

No.  81. — December  9.  Fill  this  order  from  W.  C.  Mills.  He  has  agreed  to  accept  our 
10-day  trade  acceptance.     Write  it  and  have  your  instructor  accept  it  for  W.  C.  Mills. 

No.  82. — December  9.  Invoice,  accompanied  by  a  10-day  trade  acceptance,  from  the 
Howe  Carpet  Co.     Accept  the  trade  acceptance. 

No.  83. — December  9.     Check  from  T.  J.  Jackson  &  Co.,  to  apply  on  account. 


WHOLESALE  CARPET  AND   RUG  BUSINESS  219 

No.  84. — December  10.  Discount  the  note  received  from  the  Morris  Furniture  Co.  on 
November  26th,  and  have  the  net  proceeds  placed  to  your  credit. 

No.  85.— December  10.  Prepay  your  note  for  $300.00  given  to  the  Howe  Carpet  Co. 
on  November  29th.     Deduct  the  discount  for  the  unexpired  time. 

No.  86. — December  10.  Order  from  A.  J.  Keister,  Nashville,  Tenn.,  terms  on  account, 
2/10,  n  30. 

No.  87.— December  10.  Check  from  Walter  T.  Thompson,  Louisville,  Ky.,  for  bill  of 
November  30th,  less  2%. 

No.  88. — December  11.  The  American  Express  Co.  has  returned  the  collection  of 
December  8th.     Collection  charges  50^. 

No.  8Q.— December  11.  Invoice  from  T.  M.  Lewis  &  Co.,  Harrisburg,  Pa.,  terms  cash 
less  3%.     Write  a  check  for  the  net  proceeds. 

No.  90. — December  11.     Prove  cash  and  submit  your  proof  to  your  instructor  for  approval. 

No.  91. — December  13.  A.  J.  Keister,  Nashville,  Tenn.,  to  whom  you  sold  a  bill  of 
goods  on  the  10th,  reports  that  30  yds.  of  Body  Brussels  were  defective.  Allow  him  a  rebate 
of  40(^  per  yd. 

No.  92. — December  13.     Deposit  all  checks  and  the  express  money  orders  on  hand. 

No.  93.— December  13.  The  body  Brussels  carpet  bought  from  the  ^lason  Fm-niture  Co. 
on  the  6th  is  defective,  and  they  have  agreed  to  allow  you  a  rebate  of  25(^  per  yard. 

No.  94. — December  14.  Draw  a  sight  draft  on  John  J.  Howard  &  Co.,  Philadelphia, 
Pa.,  in  our  favor,  for  the  bill  of  November  19th,  and  deposit  it  in  the  bank. 

Prepare  the  draft  and  endorse  it  to  the  bank.  Prepare  a  deposit  shp  and  take  the  draft 
to  your  instructor,  who  will  enter  the  amount  in  your  pass  book.  The  practice  followed  by  some 
banks  is  to  place  sight  drafts  to  the  credit  of  responsible  depositors,  when  requested  by  them 
to  do  so,  the  same  as  checks  or  express  money  orders.  If  the  draft  is  not  paid  when  presented, 
the  dspositor  is  notified,  whereupon  he  gives  the  bank  his  check  for  the  amount  of  the  draft. 
Since  John  J.  Howard  &  Co.  have  agreed  to  honor  your  draft  when  presented  for  payment 
and  the  bank  has  credited  your  account,  this  draft  will  be  regarded  as  cash.  Enter  the  draft 
on  the  cash  receipts  side  of  the  cashbook,  crediting  John  J.  Howard  &  Co.  Add  the  amount 
of  the  draft  to  j^our  check  book  balance. 

No.  95. — December  14.  Check  from  Walter  T.  Thompson,  Louisville,  Ky.,  for  invoice 
of  the  4th,  less  2%  discount. 

No.  96. — December  14.  Prepay  your  trade  acceptance  of  December  2d,  due  January 
1st,  by  check,  less  discount  at  6%  for  the  unexpired  time. 

No.  97. — December  15.  The  bank  presents  a  sight  draft  from  J.  Barton  &  Sons'  Carpet 
Co.  for  $101.00.  Write  a  check  for  this  amount  in  favor  of  the  Second  National  bank  and 
charge  it  to  the  J.  Barton  &  Sons'  Carpet  Co. 

Although  the  check  was  written  in  favor  of  the  Second  National  Bank,  charge  the  J. 
Barton  &  Sons  Carpet  Co.'s  account.  The  bank  is  only  collecting  the  draft  and  will  remit 
the  amount  to  the  J.  Barton  &  Sons'  Carpet  Co.     Have  the  bank  stamp  the  draft  Paid. 

No.  98.— December  15.     Order  from  the  Morris  Furniture  Co.,  Detroit,  Mich.     They 
have  enclosed  their  15-day  interest-bearing  note  in  payment. 
No.  99. — Pay  this  freight  bill  by  check. 


220 


BOOKKEEPING   FOR   MODERN   BUSINESS 


No.  100. — December  IG. 
60-day  interest-bearing  note. 
No.  101.— December  16. 
No.  102. — December  16. 
No.   103.— December  17. 


Order  from  T.  J.  Jackson  &  Co.     It  is  accompanied  by  a 


Order  from  W.  C.  Mills,  Lima,  Ohio. 
Invoice  from  T.  M.  Lewis  &  Co.,  Harrisburg,  Pa. 
Write  a  check  in  favor  of  W.  B.  Jones  &  Sons,  Washington, 
D.  C,  in  payment  of  invoice  of  December  2d,  less  2%  discount. 

No.  104. — December  17.  The  Second  National  Bank  presents  a  sight  draft  drawn 
upon  us  by  the  Simpson  Furniture  Co.,  Knoxville,  Tenn.,  for  the  balance  of  the  invoice  of 
November  6th. 

No.  105. — December  17.  Order  from  the  Morris  Furniture  Co.,  Detroit,  Mich.  The 
goods  are  to  be  shipped  In'  freight  f.  o.  b.  Philadelphia.  They  request  that  we  prepay  the 
freight  and  charge  it  to  their  account. 

When  goods  are  shipped  f.  o.  b.  (free  on  board)  place  of  shipment,  the  seller  delivers  the 
merchandise  to  the  transportation  compan}^,  which  transports  the  merchandise  at  the  expense 
of  the  buyer.  Shipping  goods/,  o.  b.  Philadelphia  means  that  you  are  to  deliver  the  goods 
to  the  transportation  company^  and  the  Morris  Furniture  Co.  is  to  pay  the  freight  charges 
from  Philadelphia  to  Detroit.  As  they  have  requested  you  to  prepay  the  charges,  you  will 
do  so  and  charge  it  to  their  account. 

Prepare  the  bill,  terms,  On  account,  f.  o.  h.  Philadelphia.  Take  $6.50  from  the  cash  drawer 
and  prepay  tlie  freight  charges.    Make  an  entry  in  the  cashbook  as  follows: 

Illustration  202 


/7 


//CtT^/i^.^Ci^A^'Vc^li-d^yL.,^^ 


-;^-^.^^e«^^ai^^^^<^^^^2^ 


The  amount  of  the  prepaid  freight  charges  should  be  added  to  the  amount  of  the  bill. 

No.  106. — December  18.  Write  a  check  in  favor  of  the  J.  Barton  &  Sons'  Carpet  Co.  in 
payment  of  your  interest  bearing  note  due  to-day. 

Take  the  note  from  the  Notes  Payable  file  and  calculate  the  interest.  Write  a  check  for 
the  amount  of  the  note.  The  amount  of  a  note  is  the  face  plus  the  interest.  Two  entries  are 
required  in  the  cashbook  as  follows: 

Illustration  203 


J7> 


<i2 


No.  107.— December  18.  Invoice  from  the  J.  Barton  &  Sons'  Carpet  Co.,  terms  10-day 
note  with  interest. 

If  the  amount  of  the  invoice  is  correct,  write  a  6%  interest-bearing  note  in  favor  of  the  J. 
Barton  k  Sons'  Carpet  Co. 

Report  No.  8.— Prepare  a  report  and  post  all  entries  to  date. 


WHOLESALE  CARPET  AND  RUG  BUSINESS 


221 


No.  108. — December  18.  Received  this  30  day  interest-bearing  note  from  tlie  Butler  & 
Carson  Co.,  to  balance  their  account. 

No.  109. — December  18.     Order  from  AValter  T.  Thompson,  T.ouisville,  Ky. 

Draw  a  30-day  time  draft  on  Walter  T.  Thompson  for  the  amount  of  the  bill,  and  have 
your  instructor  accept  it  for  Walter  T.  Thompson. 

No.  110. — December  20.  This  check  is  in  payment  of  W.  C.  Mills'  acceptance  of 
December  9th,  which  was  due  yesterday  (Sunday). 

Notes  and  trade  acceptances  falling  due  on  Sunday  are  generally  paid  on  the  next 
business  day. 

No.  111. — December  20.  Write  a  check  in  favor  of  the  Howe  Carpet  Co.  for  the  amount 
of  your  acceptance  due  yesterday. 

No.  112. — December  21.     Invoice  from  the  Howe  Carpet  Co.,  terms  on  account. 

No.  113. — December  21.     Order  from  A.  J.  Keister. 

Fill  the  order.  Since  A.  J.  Keister  has  given  you  an  interest-bearing  note,  allow  him 
the  regular  2%  discount.  A.  J.  Keister  is  debited  for  the  full  amount  of  the  bill  in  the  sales 
journal.  He  is  credited  for  the  amount  of  the  note  in  the  notes  receivable  book  and  credited 
for  the  amount  of  the  Discount  on  Sales  in  the  journal.  Debit  the  Discount  on  Sales  account 
and  credit  A.  J.  Keister's  account  in  the  journal.  Study  the  transaction  thoroughly  as  it 
occurs  frequently  in  business.     Deduct  the  discount  on  the  bill. 

No.  114. — December  21.  Invoice  from  the  Simpson  Furniture  Co.  They  have  agreed 
to  allow  you  a  discount  of  2%  if  you  give  them  your  30-day  interest-bearing  note  in  payment. 

Verify  the  invoice.  Deduct  the  2%  discount  from  the  amount  of  the  invoice  and  write 
an  interest-bearing  note  for  the  net  amount. 

No.  115. — December  22.  Discount  T.  J.  Jackson  &  Co.'s  note  received  on  December  16th 
at  the  bank  and  receive  credit  for  the  proceeds.  Prepare  a  discount  memorandum.  This  is  a 
60-day  interest-bearing  note.  In  discounting  an  interest-bearing  note,  the  bank  will  first 
find  the  amount  due  at  maturity.  This  amount  is  usually  written  on  the  face  of  the  note  in 
red  ink  by  the  discount  clerk.  He  then  calculates  the  discount  on  the  amount  due  at  maturity 
for  the  unexpired  time.  Find  the  amount  of  the  note  by  adding  the  interest  to  the  face. 
Calculate  the  discount  on  the  amount  of  the  note  for  the  unexpired  time.  Have  the  instruc- 
tor enter  the  proceeds  in  your  pass  book.  The  entries  in  the  cashbook  should  be  as  follows : 
Illustration  204 


22 


22 


y  (/.L/cl^C<^<:U>■P^^'^  C-tf'c/,-^?**'^^ 


^J^^i-^-^^gyts-^i^  o<^ypi>U'ty'  v  y.^>^y£^i-e<^y^J./ar.,^^-t:dcc^^-<f^^s> 


•^.^7 

so 


JO 


Credit  the  Interest  Earned  account  for  the  difference  between  the  amount  of  the  interest 
and  the  amount  of  the  discount. 

No.  116. — December  22.     Order  from  Butler  &  Carson  Co.,  terms  on  account. 

No.  117.— December  22.     Fill  this  order  from  T.  J.  Jackson  &  Co. 

Allow  them  a  discount  of  3%,  in  return  for  their  30-day  interest-bearing  note. 

No.  118. — December  23.  Write  a  check  in  your  favor  for  $60.00,  and  charge  the  amount 
to  your  Personal  account. 


222 


BOOKKEEPING  FOR   MODERN  BUSINESS 


No.  110.— Dpccmber  23 

No.  120.— Docombcr  23. 

No.  121.— Dceombor  24. 

No.  122.— December  24. 

No.  123.— December  24 
SIOO.OO.     Pay  it  by  check. 

No.  124.— December  24. 
in  pa\Tnent. 

No.  125.— December  27. 

No.  126.— December  28. 


Fill  this  order  from  A.  J.  Keister.     Terms  2/10,  n/30. 
Pay  this  freight  1)111  by  check. 
Pay  the  Lehigh  Coal  Co's.  bill  by  check. 
Check  for  $100.00,  from  the  Morris  Furniture  Co. 

The  bank  presents  the  Mason  Furniture  Co.'s  sight  draft  for 

Invoice  from  J.  M.  Lynch  &  Co.,  Albany,  X.  Y.     Send  a  check 


Invoice  from  the  J.  Barton  &  Sons'  Carpet  Co. 
Invoice  from  the  Simpson  Furniture  Co.,  terms  3%  discount 
in  consideration  of  your  giving  them  your  30-day  note  with  interest. 

No.  127. — December  28.     Order  from  Walter  T.  Thompson,  terms  cash,  less  2%. 

No.  128. — December  28.     Write  a  check  in  favor  of  the  J.  Barton  &  Sons'  Carpet  Co.  for 
the  amount  of  their  note  due  to-day. 

No,  129. — December  29.     Discount  at  the  bank  the  note  received  on  December  18th, 
from  the  Butler  &  Carson  Co. 

No.  130.- -December  30.     This  order  is  a  cash  sale. 

No.  131. — December  30.     Discount  the  note  received  from  A.  J.  Keister  on  the  21st. 

No.  132. — December  30.     Check  from  the  Morris  Furniture  Co.  in  pa>Tnent  of  their 
interest -bearing  note  due  to-day. 

No.  133. — December  31.     Deposit  all  checks  and  currency  on  hand. 

No.  134. — December  31.     Credit  Thomas  B.  Miller  and  yourself  for  your  salaries  for 
the  month,  SIOO.OO  each. 

The  partners  are  generally  credited  each  month  with  their  salaries.     The  following  illus- 
trates the  form  of  the  journal  entry. 

Illustration  205 


*^2i^.if-ii:Z<l^C<^^^^t<:i^^ 


3/ 


->c::^^<;<z^i>2^^ '?^<^dfe'?«au^ 


,.«^t«<^'^<ki'.^<«^-^-<,<i^2!^<w?^^«-<^!^ 


2ce 

eo 

r0O 

00 

00 


Report  No.  9. — Prepare  a  report  and  post  all  entries.     Send  statements  to  customers. 

Merchandise  Inventory  December  31st,  19 — 

Axrninster 100  yds.  S1.62 

Bodv  Bru.ssels   45    "  1.49 

Lining 900    "  .12 

Ingrain 160    "  .78 

French  Wilton 25    "  4.05 

Velvet 00    "  1.33 

6x9  Wilton  Rugs 13  26.55 

9x12  Axrninster  Rugs 2  20.25 

6x9  Axrninster  Rugs 30  11.25 


SUPPLEMENTARY  EXERCISE 


223 


Adjusting  Entries. — The  entries  have  been  made  for  the  regular  transactions.  It  is 
necessary  now  to  make  certain  adjusting  entries  in  order  that  the  accounts  may  show  the 
actual  items  of  expense  incurred  during  the  business  period. 

Insurance. — The  Insurance  account  was  debited  for  the  cost  of  the  insurance  on  the 
stock  of  merchandise  $6.40  and  for  the  insurance  on  the  building  S60.00.  The  goods  were 
insured  by  the  month  and  the  building  by  the  year.  The  monthly  charge  for  insurance  on 
the  building  is  $5.00. 

Make  an  entry  in  the  journal  debiting  the  Real  Estate  Expense  account  for  $5.00  and  the 
Selling  Expense  account  for  $6.40  and  crediting  the  Insurance  Prepaid  account  for  $11.40 

Depreciation  on  Furniture  and  Fixtures. — The  furniture  and  fixtures  have  depreciated 
in  value  10%.  JMake  an  entry  in  the  journal  debiting  the  General  Expense  account  with 
10%  of  the  original  cost  and  crediting  the  Furniture  and  Fixtures  account. 

Merchandise  Inventory. — Transfer  the  inventory  of  November  30th  to  the  Merchandise 
Purchases  account  by  a  journal  entry  debiting  the  Merchandise  Purchases  account  and  credit- 
ing the  Merchandise  Inventory  account.  This  closes  the  Merchandise  Inventory  account. 
The  debit  side  of  the  Merchandise  Purchases  account  will  now  show  the  cost  of  the  mer- 
chandise on  hand  at  the  beginning  of  the  business  period,  and  when  the  total  of  the  purchases 
journal  is  posted,  it  will  show  the  total  cost. 

Closing  the  Books. — Close  all  books  of  original  entry ,  post,  check,  take  a  trial  balance, 
prepare  working  sheet,  statements,  and  close  the  accounts  by  making  the  journal  entries  as 
previously  instructed.     The  net  gain  or  loss  is  to  be  divided  equally  between  the  partners. 

The  following  illustration  shows  the  journal  entr}^  to  close  the  Profit  and  Loss  account 
and  to  transfer  the  profit  to  the  partners'  accounts.  Assuming  that  the  profit  shown  by  the 
Profit  and  Loss  account  is  $300.00,  and  that  it  is  to  be  divided  equally  between  the  partners, 
the  amount  to  be  credited  to  each  partner's  account  would  be  $150.00. 


Illustration  206 


S/ 


■9^^^^<£^ 


i-€>-'i>C&rdJ>C 


■i'^^z-e^  /^ 9^^Z^ayC'C<?-i'€^yiZ^ 


Ji^a 


oa 


/so 


0(7 


/so  \oo 


If  the  Profit  and  Loss  account  should  show  a  loss  of  $300.00,  it  would  be  necessary  to 
reverse  the  above  entry,  debiting  each  partner's  account  and  crediting  the  Profit  and  Loss 
account. 

Analysis. — Find  the  percentages  called  for  on  page  202  for  Thomas  B.  Miller  &  Co.'s 
profit  and  loss  statement  for  the  period  closing  December  31,  19 — .  Compare  the  results 
shown  by  the  November  statement  with  the  results  shown  by  the  December  statement. 
Submit  a  statement  showing  the  increase  or  decrease  for  each. 


224  BOOKKEEPING  FOR  MODERN  BUSINESii 

Review  Exercise 

Exercise  97 

November  1.     (Student)  ))egan  the  Wholesale  Carpet  and  Tiup,  lousiness  at  1634  North 
Cherry  St.  (your  eitjO  by  investing  casii,  SG,UOO.UO. 
1.     Rented  the  store  building  and  paid  one  month's  rent  in  advance,  SIOO.OO. 

1.  Purchased  from  C.  C.  Benton,  418  Clyde  Ave.,  Muncie,  Ind.,  an  invoice  of 

merchandise,  terms  2/10,  n/30,  $658.90. 

2.  Purchasetl  merchandise  from  F.  L.  White,  56  West  Monroe  St.,  Cleve- 

land,   Ohio.     Amount    of   invoice   S534.10.     Gave   him   your    10-day 

note  in  payment. 
2.     Paid  the  Kelly  Stationery  Co.  $9.10  for  books  and  stationery. 
2.     Sold  to  Henry  R.  Johnson,  234  North  Winston  St.,  Richmond,  Va.,  the 

following  merchandise:  40  yds.  Axminster  at  $1.80  per  yd.;  2  Wilton 

Rugs,  9  X  12,  at  $45.00  each.     Received  in  payment  his  check  for  the 

value  of  the  rugs,  balance  on  account. 

2.  Sold  to  John  H.  Scott,  427  Wallace  St.,  Philadelphia,  Pa.,  the  following 

merchandise:    4  Axminster  Rugs  at  $23.00  each;    50  yds.  of  Ingrain 
carpet  at  86p  per  yd.     Received  in  payment  his  10-day  note. 

3.  Purchased  from  H.  D.  Brown,  316  North  Dill  St.,  Akron,  Ohio,  an  invoice 

amounting  to  $472.67.     Gave  in  payment  your  check  for  $272.67  and 
your  10-day  note  for  the  balance. 
3.     Sold  to  Carmen  &  Hunter,  326  Euclid  Ave.,  Cleveland,  Ohio,  a/c  10  days, 
36  vds.  Tapestry  Brussels  at  $1.02  per  yd.;  3  Axminster  Rugs,  9  x  12, 
at  .$22..50. 

3.  Sold  to  C.  J.  Morris  &  Co..  2318  W^alnut  St.,  Philadelphia,  Pa.,  2%  10 

days,  65  yds.  Matting  at  42^;   20  yds.  French  Wilton  at  $4.50. 

4.  Paid  by  check  the  Pennsylvania  Railroad  Co.'s  bill  for  freight  charges  to 

date^  $9.62. 
4.     Sold  to  Chas.  C.  Bauman,  212  Cherrv  St.,  Ada,  Ohio,  2^   10  days,  2 
Wilton  Rugs,  9  x  12,  at  $45.00;    2  Wilton  Rugs,  6x9,  at  $29.50. 

4.  Purchased  from  A.  P.  Snook,  162  Union  Ave.,  Baltimore,  Md.,  a/c  10 

davs,  merchandise  amounting  to  $168.50. 

5.  Sold  to  C.  J.  Morris  &  Co.  on  their  30-day  note,  50  yds.  Velvet  carpet  at 

$1.47;   50  yds.  Lining  at  14^;    70  yds.  Ingrain  at  87^. 
5.     Discounted  at  the  bank  C.  J.  Morris  &  Co.'s  note  received  to-day  and 
received  credit  for  the  proceeds. 

5.  Sold  to  John  H.  Scott  the  following  merchandise:  5  Wilton  Rugs,  9  x  12, 

at  $45.00;   2  Axminster  Rugs,  9  x  12,  at  $22..50.     Received  in  payment 
his  check  for  $170.00  and  his  30-day  note  for  the  balance. 

6.  Chas.  C.  Bauman  returned  for  credit  a  defective  Wilton  Rug  bought  on 

the  4th.     Selling  price,  $29.50. 
6.     Sold  to  H.  H.  Mann,  213  Monroe  St.,  Chicago,  111.,  terms  C.  O.  D.,  2 

Axminst(>r  Rugs,  9x  12,  at  $22.r->0. 
6.     Returned  the  defective  rug  recoiv(>d  from  Chas.   C.  Bauman   to  A.  P. 

Snook  from  whom  we  purchased   it.     Received  credit   at   cost   price, 

$26.55. 
8.     The  American  Express  Co.  retmiicd  tlu"  C.  O.  D.  collection  of  November 

6th,  collection  charges  25(^. 
8.     Purdiased  of  C.  C.  Benton  some  special  Wilton  Rugs,  terms  2  10,  n  30. 

Amount  of  invoice,  .$232.50. 
8.     Ordered  merchandise  by  telegraph  from  F.  L.  White,  Cleveland,  Ohio. 

Paid  25(^  charges. 
Post  all  entries  to  date. 


SUPPLEMENTARY  EXERCISE  225 

November  9.     Discounted  at  the  bank  the  note  for  $100.00  received  on  the  oth  from 
John  H.  Scott.     (Make  the  entry  on  a  piece  of  paper  and  have  it 
approved  by  the  instructor  in  charge  before  making  entry  in  books.) 
9.     Took,  at  cost  price,  1  Wilton  Rug,  9  x  12,  for  your  personal  use,  $40.50. 
10.     Sold  to  John  H.  Scott,  on  account,  80  yds.  Axminster,  $L80;    80  yds. 

Lining,  14p. 
10.     Purchased  merchandise  from  H.  D.  Brown,  2/10,.  n/30,  $168.70. 

10.  Paid  freight  on  the  above  invoice,  $3.20. 

11.  Paid  your  note  due  to-day,  $534.10. 

11.  Paid  C.  C.  Benton  for  invoice  purchased  on  the  1st. 

12.  John  H.  Scott  gave  you  his  check  in  payment  of  his  note  due  to-day, 

$135.00. 
12.     Received  the  goods  ordered  by  telegraph  from  F.  L.  White,  Cleveland, 
Ohio.     Amount  of  invoice  $198.75,  terms  on  a/c. 

12.  Received  from  Henry  R.  Johnson  his  check  for  $72.00  the  balance  of  the 

bill  purchased  on  the  2d. 

13.  Sold  to  Henry  R.  Johnson,  2/10,  n  30,  60  yds.  Body  Brussels,  $1.65; 

25  yds.  Tapestry  Brussels,  $1.02. 
13.     Received  Carmen  &  Hunter's  check  in  full  for  bill  due  to-day.     (Refer 

to  his  ledger  account  for  the  amount.) 
13.     Paid  by  check  your  note  drfe  to-day. 
13.     Received  from  C.  J.  Morris  &  Co.  a  check,  $114.95,  in  payment  of  bill 

of  the  3d  less  the  discount. 
15.     Sold  to  Carmen  &  Hunter,  2/10,  n/30,  5  Axminster  Rugs,  9  x  12,  at 

$22.50;   5  Axminster  Rugs,  6  x  9,  at  $12..50. 
15.     Paid  A.  P.  Snook  $141.95  for  invoice  bought  on  the  4th  less  returned 

goods. 

15.  Received  cash,  $117.11,  from  Chas.  C.  Bauman  for  bill  clue  to-day  less 

2%. 

16.  Sold  to  C.  J.  Morris  &  Co.,  20  vds.  French  Wilton,  $4.50;  60  yds.  Ingrain, 

87^;   3  Wilton  Rugs,  $45.00;   terms,  note  30  days  for  $200.00,  balance 
on  a/c. 
Post  all  entries  to  date. 

16.  Discounted  the  note  received  from  C.  J.  Tvlorris  &  Co.  and  received 

credit  for  the  proceeds. 

17.  Sold  to  Walter  T.  Brown,  Norfolk,  Va.,  C.  0.  D.,  1  Wilton  Rug,  9  x  12, 

$45.00;   1  Axminster,  6x9,  $12.50. 
17.     Sent  F.  L.  White  a  check  for  $150.00  to  apply  on  account. 

17.  Paid  electric  light  bill  in  cash,  $6.30. 

18.  Paid  C.  C.  Benton,  $227.85,  in  full  for  invoice  of  8th  less  discount. 

18.  Purchased  merchandise  from  A.  P.  Snook  for  $260.00,  and  gave  a  10-day 

note  in  pajoiicnt. 

19.  Received  an  express  money  order  for  $57.25,  for  the  goods  sent  to  Walter 

T.  Brown  on  the  16th.     The  balance  of  the  amount  was  retained  for 
collection  charges. 

19.  Sold  to  Chas.  C.  Bauman,  50  yds.  Velvet,  $1.47;    90  yds.  Lining,  lU; 

20  yds.  Tapestry  Brussels,  $1.02.     Received  in  payment  his  30-day 
note. 

20.  Paid  H.  D.  Brown,  by  check  for  invoice  of  November  10th  less  discount. 
20.     Purchased  merchandise  from  C.  C.  Benton  on  a  c,  $584.21. 

22.     Paid  the  Pennsylvania  Railroad  Co.'s  freight  bill  of  $4.18. 

22.  Received  cash,  -SIOO.OO,  from  John  H.  Scott  to  applv  on  a/c  of  bill  of  the 

10th. 

23.  Henry  R.  Johnson  sent  you  a  check  for  $122.01  to  pay  his  bill  of  Novem- 

ber 13th  less  discount. 


^''■' 


226 


BOOKKEEPING  FOR   MODERN  BUSINESS 


November  23.     Sent  F.  L.  White  a  check  to  balance  his  account. 

24.     Purchased    nierchanthse   from    H.    1).    Brown.    So50.00.     Gave   in    part 
payment  a  30-(lay  note  for  §250.00,  balance,  on  a  c. 

24.  Returnetl  to  H.  U.  Brown  a  ruR  costing  $40.50,  purchased  from  him  on 

the  24th.     It  was  found  to  be  defective. 

25.  Carmen  &  Hunter  sent  you  a  check  for  $175.00  the  amount  of  their  bill 

due  to-day.     They  order  2  Wilton  rugs  at  $45.00  each,  which  you 
have  billed  to  them  on  account. 

26.  Paid  C.  C.  Benton  .$350.00  to  apply  on  invoice  of  November  20th. 

26.  Paid  the  Lehigh  Coal  Co.  for  2  tons  coal  at  $6.80  per  ton. 

27.  Carmen  &  Hunter  returned  for  credit  one  of  the  rugs  bought  on  the  25th; 

value  of  rug,  $45.00. 

29.  Paid  your  note  for  $260.00  due  yesterday. 

30.  Paid  your  bookkeeper's  salary,  $40.00. 

30.     Inventory  of  merchandise  on  hand,  $1,994.47. 

Post,  close,  and  check  all  books.     Take  a  trial  balance. 
Prepare  a  working  sheet,  profit  and  loss  statement  and  balance   sheet  and  make  the 
necessary  journal  entries  to  close  the  accounts  in  the  ledger. 

Submit  all  of  the  supplementary  work  to  your  instructor  for  approval. 

Exercise  98 
John  C.  Mason's  Trial  Balance,  June  30,  19 — 


1 

1 

2 

2 

3 

3 

6 

6 

7 

7 

8 

8 

9 

12 

12 

12 

14 

14 

14 


Cash 

Notes  Receivable 
Furniture  and  Fixtures 
Notes  Payable 
John  C.    Mason,    Capital 
John  C.    Mason,    Personal 
Merchandise   Purchases 
Freight   Inward 
General   Expense 
Interest   Paid 
Discount   on  Sales 
Merchandise  Sales 
Discount   on  Purchases 
Walter  Cohan  &  Son 
Warner  &  Warner 
James   B.    Arnold 
John  L.    Moore 
J.    C.    Grace 
T.    C.   Johnson 


4,780 

03  1 

1,575 

00 

200 

00 

50 

00 

7,895 

43 

31 

00 

76 

56 

1 

75 

75 

30 

675 

42 

10 

79 

789 

09 

$16,160 

37  1 

1 

530 

8,000 


00 

00 


6,890      23 


98 


467 

106 

67 


|$16.160 


30 


78 
54 
52 


37 


Merchandise  Inventory,  June  30,  19—,  $1,547.80. 

In  th(!  al)OVe  trial  balance  the  Merchandise  Purchases  account  was  debited,  $7,987.15 


SUPPLEMENTARY  EXERCISE  227 

and  credited  for  goods  returned  to  others,  $91.72;  the  Merchandise  Sales  account  was 
credited,  $6,942.56,  and  debited,  $52.33,  the  amount  of  goods  which  were  returned  by  others. 
Prepare  a  working  sheet,  profit  and  loss  statement,  and  balance  sheet,  and  make  the 
necessary  journal  entries  to  close  the  accounts  in  the  ledger.  Present  all  papers  to  your 
instructor  for  approval. 

Exercises  for  the  Student 
Cashbook  Exercise  99 

Design  a  special  column  cashbook  and  enter  the  following  transactions.     Close  the  cash- 
book  at  the  end  of  the  month. 

May  1.  Balance,  $2,807.65. 

2.  Paid  office  rent  for  the  month  in  advance,  $250.00. 

4.  Paid  last  month's  bill  for  advertising  in  the  Inquirer,  $65.00. 

5.  Received  a  check  from  C.  C.  Collins  for  his  bill  of  June  15th,  $567.50  less  a 

discount  of  2%. 

6.  Paid  Walter  Bacon  for  invoice  of  June  20th,  $756.80,  less  a  discount  of  3%. 

8.  Paid  freight  bills  to  date,  $25.66. 

10.     Paid  our  60-day  note  for  $200.00   in   favor  of   George   E.  Bender,  due  to- 
day. 
12.     B.  B.  Hunt  paid  his  account  in  full,  $345.00. 

14.  Paid  $4.00  for  stamped  envelopes. 

15.  Received  a  check  from  T.  C.  Mann  for  $300.00  in  payment  of  note  due  to-day. 

16.  Received  a  check  from  Brown  Bros,  for  $22.50  in  payment  of  interest  on  their 

note  which  was  renewed  to-day. 
18.     Paid  our  30-day  note  due  to-davj  for  $400.00,  to  Robert  H.  Allen,  with  interest 

at  5%. 
20.     Paid  salary  of  bookkeeper  to  date,  $75.00. 
22.     Paid  expenses  of  traveling  salesman,  $35.00. 

Cashbook  Exercise  100 

June  1.  Balance,  $3,645.50. 

2.  T.  C.  Smith  paid  his  account  in  full,  $156.00. 

4.  Paid  Robert  H.  Allen  in  full  of  account,  $188.50. 

5.  Paid  S.  C.  Ashley's  invoice  of  May  15th,  $450.00,  less  2%  discount. 

5.  Paid  freight  on  invoice  of  merchandise  received  from  Butler  &  Carson,  $12.50. 

6.  J.  H.  Ervin  paid  his  bill  of  May  25th,  $375.70,  less  discount  3%. 

7.  Received  a  check  from  Miller  Bros,  in  pavment  of  note  due  to-day,  $400.00. 

9.  Loaned  G.  W.  Botsford  $300.00,  and  took  his  note  for  30  days. 

10.  Paid  coal  bill  $24.55  in  cash. 

11.  Paid  our  60-day  note  for  $260.00  due  to-day,  in  favor  of  the  Commercial  Bank, 

with  interest  at  6%. 
14.     Paid  telephone  bill  for  May,  $4.50. 

18.     Received  cash,  .$450.00,  from  C.  S.  Morey,  to  apply  on  account. 
20.     Paid  clerks'  salary  to  date,  $60.00. 

25.     Received  a  check  from  H.  F.  Adams  in  payment  of  bill  of  May  30th,  $650.00  less 
3%. 

Exercise  101 
The  footings  of  the  following  trial  balance  are  equal,  but  some  of  the  accounts  show  that 
the  principles  of  debit  and  credit  have  been  violated  in  making  the  original  entries.     Find 
the  accounts  that  are  wrong  and  state  your  reasons. 


228 


BOOKKEEPING  FOR  MODERN  BUSINESS 


H.  O.  Grey's  Trial  Balance,  July  31,  19 


1 

H.  0.  Grey,  Capital 

$4,000 

00 

1 

Cash 

$3,329 

46 

2 

Merchandise  Purchases 

3,250 

00 

2 

Discount  on  Purchases 

65 

50 

3 

Merchandise  Sales 

2,875 

78 

4 

Discount  on  Sales 

26 

78 

5 

Interest  Paid 

17 

60 

5 

Interest  Earned 

15 

00 

6 

Notes  Receivable 

300 

00 

7 

Notes  Payable 

150 

00 

8 

George  Griffith 

420 

00 

9 

H.  0.  Gray,  Personal 

45 

00 

$7,247 

56 

'  $7,247 

56 

CLOSING   THE   LEDGER— DIRECT   METHOD 

You  have  previously  learned  that  the  object  of  closing  the  accounts  in  the  ledger  is  to 
transfer  the  net  profit  or  loss  shown  by  the  profit  and  loss  statement  to  the  proprietor's 
account.  You  have  been  instructed  to  close  the  accounts  showing  a  profit  or  a  loss  by  making 
a  series  of  journal  entries  and  then  posting  them,  thus  closing  the  ledger  accounts. 

Another  method  which  is  used  by  some  bookkeepers  is  known  as  the  Direct  Method  of 
closing  the  ledger.  The  same  principle  applies  to  the  closing  by  the  direct  method  as  in  the 
jomnal  entry  method;  but,  there  is  a  difTerent  application  of  the  principle.  The  direct 
method,  as  the  name  infers,  is  a  dh-ect  transfer  from  one  account  to  another  without  making  a 
journal  entry.  To  illustrate:  If  the  General  Expense  account  showed  a  loss  of  S25.00,  this 
amount  would  be  entered  on  the  credit  side  of  the  General  Expense  account  in  order  to  balance 
the  account,  and  the  same  amount  would  be  placed  on  the  debit  side  of  the  Profit  and  Loss 
account.  This  you  will  readily  see  is  the  same  in  principle  as  the  making  of  a  journal  entry 
debiting  the  Profit  and  Loss  account  and  crediting  the  General  Expense  account.  It  is  neces- 
sary that  the  transfer  be  properly  paged.  In  other  words,  the  entry  in  the  General  Expense 
account  should  show  the  page  of  the  ledger  on  which  the  Profit  and  Loss  account  is  recorded, 
and  the  entry  in  the  Profit  and  Loss  account  should  show  the  page  of  the  General  Expense 
account  from  which  the  transfer  was  made.  The  following  illustrations  show  a  series  of 
accounts  closed  by  the  direct  method. 

Directions  for  Closing  a  Ledger  by  the  Direct  Method. — Follow  the  directions  in  the 
successive  steps  given  below  and  compare  each  step  with  the  ledger  which  follows. 

Step  1. — The  first  step  to  l)e  taken  is  to  tiansfcr  tJie  result  of  the  Merchandise  Sales 
account  to  the  Merchandise  Trading  account.  This  is  done  I)}'  inserting  on  the  debit  side, 
the  amount  required  to  balance  the  account.  Red  ink  is  usually  used  for  this  purpose.  The 
explanation  space  is  used  to  name  the  account  to  which  the  balance  is  to  be  transferred,  which, 
in  this  case,  is  the  Merchandise^  Trading  account.  It  is  vt  ly  important  to  place  the  page  of 
the  account  to  which  you  make  the  transfer  in  the  folio  colunui.     Next  the  balance  is  entered 


CLOSING   THE  LEDGER— DIRECT  METHOD  229 

on  the  credit  side  of  the  Merchandise  Trading  account,  under  the  same  date  that  was  used 
in  Merchandise  Sales  account.  Merchandise  Sales  is  written  in  the  explanation  space,  as  this 
is  the  name  of  the  account  from  which  the  transfer  was  made.  The  page  of  the  Merchandise 
Sales  account  is  placed  in  the  folio  space.  This  shows  from  which  page  in  the  ledger  the  trans- 
fer was  made.  It  is  readily  seen  that  the  principle  is  the  same  as  when  a  journal  entry  is 
made,  debiting  Merchandise  Trading  account  and  crediting  the  Merchandise  Sales  account, 
and  posting  it  as  previously  instructed. 

Step  2. — The  balance  of  the  Freight  Inward  account  is  transferred  to  the  Merchandise 
Purchases  account.  As  the  debit  side  of  the  Freight  Inward  account  is  the  greater,  it  is  neces- 
sary to  enter  the  balance  on  the  credit  side  in  red  ink,  naming  the  account  and  inserting  the 
page  to  which  the  transfer  is  to  be  made.  This  balance  is  entered  on  the  debit  side  of  the 
Merchandise  Purchases  account,  naming  the  account  and  inserting  the  page  from  which  the 
amount  was  transferred. 

Step  3. — The  balance  of  the  Merchandise  Purchases  account  is  transferred  to  the  Mer- 
chandise Trading  account  by  entering  the  amount  necessary  to  balance  the  account  on  the 
credit  side  and  transfer  the  balance  to  the  debit  side  of  the  Merchandise  Trading  account. 

Step  4. — The  value  of  the  merchandise  on  hand  at  the  end  of  the  business  period,  is 
entered  on  the  credit  side  of  the  Merchandise  Trading  account  and  also  on  the  debit  side  of 
the  Merchandise  Inventory  account. 

Step  5.— The  Merchandise  Tradmg  account  is  closed  in  order  to  transfer  the  net  gain 
or  loss  on  sales  to  the  Profit  and  Loss  account.  If  the  debit  side  is  the  smaller,  the  difference 
is  a  gain  and  is  entered  on  the  debit  side  of  the  Merchandise  Trading  account  and  on  the  credit 
side  of  the  Profit  and  Loss  account.  If  the  credit  side  is  the  smaller,  the  difference  is  a  loss 
and  is  entered  on  the  credit  side  of  the  Merchandise  Trading  account  and  on  the  debit  side  of 
the  Profit  and  Loss  accomit.     In  the  above  case  the  difference  is  a  gain. 

Step  6. — The  Discount  on  Purchases  account  is  closed  and  the  balance  representing  an 
income  is  transferred  to  the  credit  side  of  the  Profit  and  Loss  account. 

Step  7. — The  Discount  on  Sales  account  is  closed.  As  this  account  shows  a  loss,  the 
balance  is  transferred  to  the  debit  side  of  the  Profit  and  Loss  account. 

Step  8. — The  General  Expense  account  is  closed  and  the  balance  transferred  to  the  Profit 
and  Loss  account. 

Step  9. — After  the  balances  of  all  the  accounts  which  affect  the  Profit  and  Loss  statement 
have  been  transferred  to  the  Profit  and  Loss  account,  it  should  be  closed  and  the  balance 
transferred  to  the  Proprietor's  account.  This  is  done  by  inserting,  on  the  smaller  side,  the 
amount  necessary  to  balance  the  account.  If  the  debit  side  is  the  smaller,  the  balance  is  a 
profit.  If  the  credit  side  is  the  smaller,  the  balance  is  a  loss.  This  balance  is  transferred  to 
the  proper  side  of  the  Proprietor's  account. 

Step  10. — The  last  step  is  to  determine  the  net  capital  of  the  proprietor  by  finding  the 
balance  of  his  account  and  entering  the  amount  of  this  balance  on  the  debit  side  of  the  account. 
Rule  the  account,  and  transfer  the  balance  below  the  ruHng,  as  previously  instructed. 

It  will  be  observed,  by  comparing  this  ledger  which  has  been  closed  by  the  direct  closing 
method  with  the  ledger  for  November,  that  the  final  result  is  the  same. 


230 

Ulustration  207 


BOOKKEEPING  FOR  MODERN  BUSINESS 


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CLOSING   THE  LEDGER— DIRECT  METHOD  231 


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232 


BOOKKEEPING  FOR  MODERN  BUSINESS 


ABBREVIATIONS,  CONTRACTIONS, 

A.,  America;  American. 

A  1,  first  class. 

Acct.  or  acct.,  account. 

Acct.  cur.,  account  current. 

Acct.  sales,  account  of  sales. 

admr.,  administrator. 

admx.,  administratrix. 

Adv.  or  adv.,  advertisement. 

Agt.,  agent. 

A.  ]M.,  before  noon;  Master  of  Arts. 

amt.,  amount. 

app.,  appendix. 

a  s,  at  sight  or  account  sales. 

asst.,  assistant. 

atty.,  attorney. 

av.  or  ave.,  avenue. 

bal.,  balance. 

b.  b.,  bill  book, 
bbl.,  barrel, 
bgs.,  bags, 
bdl.,  bundle, 
bk.,  bank, 
bkts.,  baskets. 
h/\,  bill  of  lading, 
bldg.,  building. 
l)Ot.,  bought, 
bu.,  bushel. 

bx.,  box. 
^,  cent, 
cash.,  cashier. 

c.  b.,  cashlwok. 
chgs.,  charges, 
ck.,  check. 

Co.,  company;  county. 

C.  O.  D.,  collect  on  delivery. 

coll.,  collection;  collector. 

cr.,  credit;  creditor. 

cvvt.,  hundredweight. 

da.,  day. 

dept.,  department. 

dft.,  draft. 

disc,  discount. 


AND  SIGNS  USED  IN  BUSINESS 

do.,  the  same. 

doz.,  dozen. 

Dr.,  debtor;  doctor. 

E.  &  0.  E.,  errors  and  omissions  excepted, 
ca.,  each. 

e.  g.,  for  example, 
end.,  enclosed. 
Esq.,  esquire, 
etc.  or  &c.,  and  so  forth, 
et  al.,  and  others, 
ex.,  example. 
Exch.,  Exchange. 
Fahr.,  Fahrenheit, 
fig.,  figure,  figures. 

F.  O.  B.  or  f.  o.  b.,  free  on  board, 
fol.,  folio,  or  page. 

frt.,  freight. 

ft.,  foot. 

gal.,  gallon. 

gr.,  grain. 

gro.,  gross. 

hf.  chts.,  half  chests. 

hhd.,  hogshead. 

hund,  hundred. 

i.  e.,  that  is. 

in.,  inch. 

incor.,  incorporated. 

ins.,  insurance. 

inst.,  instant;  the  present  month. 

int.,  interest. 

inv.,  invoice. 

J.,  journal. 

Jr.  or  jr.,  junior. 

kg.,  keg. 

lb.  or  lb,  pound. 

L.  B.,  letter  book. 

1/c,  letter  of  credit. 

led.,  ledger. 

L.  F.,  ledger  folio. 

ltd.,  limited. 

M.,  thousand. 

mdse.,  merchandise. 


ABBREVIATIONS,   CONTRACTIONS  AND  SIGNS 


233 


mem.,  memorandum. 

Messrs.,  Gentlemen;  Sirs. 

mfst.,  manifest. 

mfg.,  manufactm-ing. 

min.,  minute. 

Mme.,  INIadam. 

mo.,  month. 

M.  0.  D.,  Mail  Order  Department. 

Mr.,  Mister. 

Mrs.,  Mistress. 

MS.  or  ms.,  manuscript. 

MSS.  or  mss.,  manuscripts. 

mtg.,  mortgage. 

N.  A.,  North  America. 

N.  B.,  take  notice. 

No.  or  no.,  number. 

N.  P.,  notary  public. 

O.  K.,  all  right. 

Oz.  or  oz.,  ounce. 

p.,  page. 

Payt.  or  payt.,  payment. 

pc,  piece. 

pes.,  pieces. 

pd.,  paid. 

per,  by. 

per  cent.,  by  the  hundredths. 

pk.,  peck. 

pkg.,  package. 

P.  M.,  postmaster;  afternoon. 

P.  O.,  post  office. 

pp.,  pages. 

pr.,  pair. 

Pres.,  president. 


a/'c,  account. 

@,  at  or  to. 

c/o,  care  of. 

^,  cent. 

V,  check  mark. 

'',  ditto  marks;  the  same  as  above. 

$,  dollar. 

%,  per  cent. 


prox.,  proximo;  of  the  next  month. 

pt.,  pint. 

P.  S.,  postscript. 

pwt.,  pennyweight. 

qr.,  quire;  quarter. 

qt.,  quart. 

rec'd,  received. 

reg.,  registered. 

ret'd,  returned. 

R.  R.,  railroad. 

Ry.,  railway. 

Sec,  secretary. 

shipt.,  shipment. 

sq.  ft.,  square  feet. 

Sr.,  senior. 

stor.,  storage. 

St.,  street;  saint. 

str.,  steamer. 

sunds.,  sundries. 

Supt.,  superintendent. 

tr.,  transpose. 

treas.,  treasurer. 

ult.,  ultimo;  of  the  last  month. 

U.  S.  M.,  United  States  Mail. 

via,  by  way  of. 

viz.,  namely;  to  wit. 

vol.,  volmne. 

vs.  or  v.,  against. 

w/b,  way  bill. 

wk.,  week. 

wt.,  weight. 

Yd.  or  yd.,  yard. 

yr.,  year. 

ARBITRARY   SIGNS 

#,  number,  if  written  before  a  figure;  pounds 

if  written  after  a  figure. 
1^,  one  and  one-fourth. 
1^,  one  and  two-fourths. 
1^,  one  and  three-fourths. 


°,  degrees. 

',  feet;  minutes. 

",  inches;  seconds. 


INDEX 


Acceptance,  discussion  of,  208. 

Account  or  accounts,  bookkeeper's  method  illus- 
trated, 10;  classified,  135;  closing  by  balance, 
14;  definition  of,  10;  discussion  of,  9;  explana- 
tion of,  11;  financial,  135;  method  of  recording, 
12;  object  of,  12;  result  of,  12;  set  of,  12;  stu- 
dent's method  illustrated,  10. 

Accounts  payable,  19;   arrangement  in  ledger,  88. 

Accounts  receivable,  22;   arrangement  in  ledger,  88. 

Assets,  14,  22,  26. 

Balance  sheet,  135,  136;  discussion,  146;  illustration, 
146;  instructions,  146. 

Bank:  bank  account,  monthly  statement,  208;  com- 
mercial, 1.58;  definition  of,  158;  deposit  ticket, 
159;  Federal  Reserve,  159;  opening  an  account 
with,  1.58;  pass  book,  158;  savings,  158;  sig- 
nature card,  185. 

Bill,  definition  of,  33;   dupHcate,  124. 

Bill  of  lading,  description  of,  187;  how  drawn,  187; 
shipping  order,  memorandum,  187. 

Bookkeeping,  definition  of,  9;  discussion  of,  9. 

Books  of  original  entry,  70. 

Books  of  final  entry,  70. 

Books,  auxiliary,  70. 

Business  statements,  discussion  of,  135. 

Business  period,  33,  137. 

Business  transactions,  definition  of,  9;  discussion  of,  9. 

Cash,  how  proved,  189. 

Cash  book,  balancing  of,  84,  101;  checking  of,  101; 
discussion  of,  83;  exercises,  85,  227;  illustration, 
84;  illustration,  special  column,  178,  179;  prov- 
ing of,  104. 

Cash  journal,  81. 

Check  book:  check  illustrated,  187;  description  of, 
160;  endorsement  illustrated,  190;  methods 
explained,  160;  methods  illustrated,  161,  163; 
reconciliation  of  bank  statement,  165;  stub  of 
check,  186,  189. 

Check  marks,  98,  99,  100. 

Closing  entries  illustrated,  200,  201. 

Closing  the  ledger,  direct  method,  228;  illustration, 
230;  discussion  of.  138;  journal  method,  138; 
illustration,  139-144. 

Closing  the  original  entry,  198. 

C.  O.  D.,  discussion,  abstract,  194;  definition  of,  194. 

Collection  and  exchange,  194. 

Co-partnership.     See  Partnership,  215. 

Debit,  discussion  of,  11. 

Debtor,  definition,  21;  abbreviation  of,  21. 

Deposits,  159. 

Deposit  ticket,  arrangement,  159. 

Depreciation,  discussion  of,  173,  223. 

Discounts,  cash  discount,  166;  on  Purchases  account, 

167;  on  Sales  account,  168;  trade  discount,  165. 
Discoimt  memorandum,  196. 
Double  efTect  of  business  transactions,  illustrated  by 

ledger  accounts,  57,  59,  60,  61,  62;  illustrated  by 

journalizing,  67,  68. 


Drafts,  acceptance  of,  208;  bank,  212;  check  to 
purchase,  212;  definition  of,  205;  endorsement 
of,  213;  entries  for,  206,  207,  209;  exchange  on, 
212;  for  collection,  204;  form  of  three-party 
207;  form  of  two-party,  209;  kinds  of,  205 
manner  of  accepting,  208;  notification  of,  218 
parties  to  a  draft,  205;  payable  after  date,  208 
payable  after  sight,  208;  sight  draft,  204-206 
time  draft,  207;  time  sight  draft,  208. 

Endorsement  defined,  24;   illustrations,  25. 

Errors,  corrections  of,  107. 

Expense,  definition  of,  44;  discussion  of,  44. 

Files,  explanation  of,  121. 

Financial  Statement,  discussion  of,  136;  form  of,  146. 

Flour  and  Grain  Business,  without  business  papers, 

88;   with  business  papers,  120. 
Formation  of  a  partnership,  215. 
Freight  Outward  account,  closed  into,  35;  discussion, 

35;   exercises,  36;   illustration,  35. 
Freight  Outward  (see  selling  expenses),  35. 
Furniture    and    Fixtures,    discussion    of,    173;     cost 

value,  173;    depreciation  of,  173,  223;   furniture 

and  fixture  accoimt,  174;   present  value,  173. 

General  Expense  account,  analysis  of,  47;    exercises, 

48;   illustration,  47. 
Gross  profit,  42. 

Insolvency,  54. 

Insurance,  discussion  of,  177;  adjusting  entry,  223; 
agreement,  216;  insurance  prepaid  account,  177; 
policy,  177;   premium,  177. 

Interest,  discussion  of,  169;  definition  of,  169;  how 
computed,  170;  interest  earned,  169;  interest 
earned  account,  171:  interest  paid,  169;  interest 
paid  account,  172. 

Invoice,  checking  of,  122;  discussion  of,  33;  illus- 
trations, 122;  terms  of,  166. 


Journalizing,  analysis  of,  66;  definition,  67;  dis- 
cussion of,  65;  exercises,  69;  how  read,  67; 
illustrations,  67,  68. 

Liability,  19,  30. 

Merchandise,  discussion  of,  31. 

Merchandise  Inventory,  discussion  of,  39;  illustra- 
tion, 39. 

Merchandise  Inventory  account,  analysis  of,  40; 
exercises,  40;   illustration,  39. 

Merchandise  Purchases  account,  analj'-sis  of,  31; 
exercises,  34;   illustration,  31. 

Merchandise  Sales  account,  analysis  of,  37 ;  exercises, 
38;   illustration,  37. 

Merchandise  Trading  account,  analysis  of,  43;  dis- 
cussion, 33,  42;  exercises,  43;  illustration,  42. 


Negotiable,  24. 
Net  Capital,  54. 


(235) 


236 


INDEX 


Notes,  promissory,  23;  cancellation  of,  130-131; 
discount  of,  170,  196;  endorsement  of,  24;  face 
value  of,  21;  interest-bearing,  170;  parties  to,  24; 
subsequent  jjarties  to,  24;   written  forms,  24. 

Notes  Payal)le  account,  analysis  of,  28;  discussion, 
25;  exercises,  29;  illustration,  28. 

Notes  Payable  book,  checking  of,  132;  closing  of, 
132;  development  of,  115;  exercises,  117; 
journal  illustration,  115;  modified  journal  illus- 
tration, IIG;  notes  pavable,  book  illustration, 
118. 

Notes  Receivable  account,  analysis  of,  20;  discussion, 
25;  exercises,  27;   illustration,  26. 

Notes  Receivable  book,  checking  of,  132;  closing  of, 
132;  development  of.  Ill ;  exercise,  114;  journal 
illustration,  112:  modified  journal  illustration, 
112;   notes  receivable  book  illustration,  114. 

Partnership,  215. 

Percentages,  44. 

Perpetual  Inventory,  186;  stock  record  card,  186-188. 

Persona!  accounts,  balancing  of,  19,  144;  discus.sion, 
17;  with  creditors,  17;  analysis  of,  18;  exer- 
cises, 19;  illustration,  17;  with  customers,  20; 
analysis  of,  21;   exercises,  22;   illustration,  21. 

Posting,  cashbook,  94;  discussion,  70;  exercises,  72; 
journal,  70;  postmarking  of,  71,  72;  purchases 
journal,  92;  sales  journal,  93;  notes  receivable 
book,  114;   notes  payable  book,  118. 

Power  of  attorney,  184. 

Present  worth,  definition  of,  54. 

Price  li.st,  October,  157;  November,  December,  203. 

Profit  and  Loss  account,  analysis  of,  51,  138;  dis- 
cu.ssion,  135,  136;   exercises,  51;   illustration,  50. 

Proof  Trial  Balance,  148. 

Proprietor's  Capital  account,  analysis  of,  54;  exer- 
cises, 55;   illustration,  54;   personal  account,  55. 


Purchases  Journal,  checking  of,  OS;  closing  of,  98; 
development  of,  77;  exercises,  79;  journal  illus- 
tration, 77;  modified  journal  illustration,  78; 
purchases  journal  illustration,  79. 

Real  Estate,  discussion  of,  175;  building  account, 
175;  deed,  216;  land  account,  175;  real  &3tate 
account,  176. 

Receipt,  definition  of,  121;  form  of,  special,  121; 
form  of,  bill,  123. 

Red  Ink,  15. 

Report,  student,  126;  filled  in,  126. 

Resource,  14. 

Ruling  exercises,  15. 

Sales  Binder,  124. 

Sales  journal,  checking  of,  100;  closing  of,  100;  devel- 
opment of,  73;  exercises,  76;  journal  illustration, 
74;  modified  journal  illustration,  75;  sales 
journal  illustration,  76. 

Selling  Expense  account,  analysis  of,  45;  exercises, 
46;   illustration,  45. 

Signature  card,  185. 

Statements,  customer's,  133;  illustration, 
financial,  135;  Profit  and  Loss,  135,  199; 
tration,  137. 

Summary  of  principles,  56. 

Telegrams,  u.^'e  of,  217. 

Terms  of  payment,  166. 

Test  ledgers,  151. 

Trade  Acceptance,  acceptance  of,  213; 
213;  method  of  accounting,  214; 
of,  213;  use  of,  214. 

Trial  Balance,  analysis  of,  136;  discussion,  63;  exer- 
ci.ses,  64;  of  balances,  105,  136;  of  totals,  illus- 
tration, 105,  136;  preparation  of,  63,  105;  proof, 
illustration,  148;  to  find  errors  in,  136. 

Trade  Discount,  166. 

Working  Sheet,  discussion  of,  149;  illustration,  150. 


133; 
illus- 


definition  of, 
requirements 


TU   ^40 


(Vi511257 


